Global audit giant Ernst & Young (EY) is in turn dragged down by the bankruptcy scandal of German online payment company Wirecard, due to its deficiencies in account verification. Lawsuits have already been filed against the consultancy following the bankruptcy this week of the electronic payments provider, which employs 6,000 people.
German shareholders association SdK has filed a criminal action against two current auditors and one EY examiner in Germany. Wirecard , a company listed on the Frankfurt stock exchange and filed for bankruptcy on Thursday, is suspected of inflating its accounts with shell funds in the Philippines in the amount of € 1.9 billion. Finance Minister Olaf Scholz called it a “scandal without equivalent in the financial world” and assured that the controls in the electronic payments sector will be tightened.
Nobody, neither the auditors nor the German financial gendarme (Bafin), detected what was happening. And that since 2015 there were rumors in the press about irregularities in Wirecard’s economic model. Furthermore, at the beginning of 2019, the British economic newspaper Financial Times published an investigation into suspected fraud in Asia. According to the newspaper, EY did not request crucial bank information from a Singapore bank, where Wirecard claimed to have up to € 1 billion in cash.
Verification of bank deposits “is one of the easiest tasks” for an accounting auditor and is performed according to a “highly regulated procedure,” the SdK association on EY also charges. In early June, the Berlin law firm Schirp & Partner filed a lawsuit against EY. He accuses her of violating “an auditor’s control obligations.”