The Wirecard cybercrime case has been developing into a scandal for the auditor EY pretty fast. For years, EY may have systematically failed to ask critical questions and to carry out proper auditing activities. For years, unqualified audit opinions were issued and thus fueled the Wirecard hype. Since 2015, the serious allegations against Wirecard have been known to the public and were raised by reputable sources such as the investigative journalists of the Financial Times. In this situation, it is the auditor’s duty to investigate these allegations and suspicions. EY has obviously not done so.
Despite the public accusations and charges, EY apparently prepared an unqualified audit opinion for 2019 until the very end. This despite the fact that the critical KPMG special audit report was already available and despite the many publicly known facts and despite. This was revealed by a whistleblower in the Financial Times by providing the draft audit opinion. And that is a reckless behavior under criminal law.
According to the documents provided by this whistleblower, EY prepared an unqualified audit opinion on Wirecard’s accounts in early June 2020, conditional on a few actions from the company that only days later collapsed in one of Europe’s biggest accounting frauds. EY delivered a draft version to Wirecard of its official audit opinion which rejected allegations made by Financial Times, whistleblowers as well as concerns raised by a KPMG special audit published in late April 2020.
Based on the findings of our audit, the attached annual financial statements comply in all material respects with German commercial law applicable to corporations and give a true and fair view of the net assets and financial position of the company.EY Draft opinion on WireCard
EY stated that its “extended audit procedures” found no evidence that the TPA business in Asia was problematic. “Within the scope of the audit, we satisfied ourselves that the accusations [regarding third-party acquiring] of which we became aware were followed up and assessed by measures taken by the management board of Wirecard,” EY noted, says the Financial Times report.
FinTelegram and the European Funds Recovery Initiative (EFRI) are aware that lawyers in various jurisdictions are already preparing lawsuits against EY in connection with Wirecard. FinTelegram and EFRI have been asked to support these lawsuits with information and documents. FinTelegram readers are aware that whistleblowers and former Wirecard partners have provided information about Wirecard‘s involvement in cybercrime organizations since 2018.
As an experienced auditor and former EY partner, I cannot in any way understand the EY approach at Wirecard. If the information in the Financial Times is correct, then EY’s approach would probably have to be qualified at least as conditional intent or recklessness. EY would then be liable to shareholders and investors.Elfriede Sixt, EFRI Principal
The probability of lawsuits against EY by shareholders and investors is 100%. We estimate that the probability that EY Deutschland will not survive these lawsuits in their current form is more than 50%. Comparisons with ENRON and Arthur Anderson are certainly appropriate.