German regulator examines EY over Wirecard audits
The German auditing regulator is reportedly examining EY in connection with its involvement with the disgraced payment services firm Wirecard.
A document from the Economic Ministry, seen by German newspaper Handelsblatt, states that regulator Apas is examining all of EY’s audits of Wirecard from 2015.
The Big Four firm has been Wirecard’s auditor for over a decade and has faced increased scrutiny over its involvement in the now collapsed firm.
A report by the FT last month claimed that between 2016 and 2018 EY did not check with Singapore’s OCC Bank to confirm it held large amounts of cash on Wirecard’s behalf. Instead, EY relied on documents and screenshots provided by Wirecard and a third-party trustee.
Apas reportedly started looking at EY’s audits in October 2019 and has the power to check earlier submitted accounts and audits.
“A formal professional oversight examination is underway into the Ernst & Young Audit Company,” the document said, adding that the review would examine “adherence to legal and professional standards.”
In June, EY said it was unable to verify €1.9bn in Wirecard’s accounts before it collapsed into insolvency. The German payments processing firm said there was a “prevailing likelihood” that the money did not exist.
It prompted the head of the UK’s audit review to push for “urgent reform” in the sector. Donald Brydon, who was commissioned by the government to launch a review into the industry said: ““Another couple of big scandals and suddenly you have a global audit profession that is entirely in disarray because choices become more limited or there are knee-jerk reactions.”
The head of Germany’s financial regulator, BaFin, has already described the Wirecard scandal a “massive criminal act”.
“It is plain vanilla, old-fashioned criminal behaviour,” BaFin president Felix Hufeld said in an online panel discussion last month.
EY Germany said: “We support all the official investigations in the Wirecard case and we are fully cooperating with all the investigating authorities and supervisory bodies.”
“It is very important to us that the events are fully, completely and quickly examined. As always in such situations we will not further comment on this due to ongoing investigations, pending or anticipated proceedings and confidentiality obligations.”
“We point out once again that while completing the 2019 audit procedures, EY Germany identified that it had been provided false confirmations and statements with regard to escrow accounts.”