EY’s Wirecard audit exposes potential fraud

EY’s Wirecard audit exposes potential fraud

After a series of audits by EY and a special audit by KPMG, nearly €1.9bn remains unaccounted for

EY’s Wirecard audit exposes potential fraud

Nearly €1.9bn (£1.7bn) of cash has been found missing from the accounts of German payments firm Wirecard, EY audits have revealed.

The discovery was announced on June 18, and the company has since withdrawn its 2019 and preliminary Q1 2020 financial results, adding that previous annual reports may have been impacted.

Wirecard has admitted that “there is a prevailing likelihood that the bank trust account balances in the amount of €1.9bn do not exist” in a statement, following EY’s latest findings. The missing billions account for nearly a quarter of the firm’s balance sheet, as reported by the BBC.

In reference to the missing funds, two banks allegedly named in Wirecard’s financial documents, the Institutes Banco de Oro (BDO Unibank) and Bank of the Philippine Islands (BPI), issued statements saying that Wirecard is not a client of their respective banks.

“The international financial scandal used the names of two of the country’s biggest banks – BDO and BPI – in an attempt to cover the perpetrators’ track,” the governor of Bangko Sentral ng Pilipinas, Benjamin Diokno, said in a statement to journalists. He added that none of the missing funds ever entered the country’s financial system.

However, a BPI assistant manager’s signature did appear on Wirecard-connected documents, reports CNN, and BDO alerted the central bank that a marketing officer had forged a bank certificate, according to Reuters.

Neither of the banks currently face any losses connected to the situation, Diokno said in a Viber message cited by the Philippine government. However, Wirecard’s stocks have plunged and its credit rating was demoted to junk by Moody’s.

Chief operating officer Jan Marsalek has been suspended from Wirecard’s management board, on a revocable basis, until June 30.

Chief executive Markus Braun resigned on June 19 after Wirecard missed its annual results filing deadline and opened the door for €1.9bn in loans granted to the company to be terminated.

In late May, Wirecard’s chief financial officer, Alexander von Knoop, told Accountancy Age that he expected “no major deviations of these very intensively audited financial statements from the reported preliminary figures.”

Although EY caught the error, Dutch shareholder group VEB is pursuing compensation from the Big Four firm, saying: “EY has played a significant role in the whole Wirecard scandal, not only from its inability to detect the flaws in Wirecard’s escrow account in former years.”

VEB also alleges that on May 3, investors were told by Braun that EY had no concerns signing off on their 2019 audit, wrongfooting the market.

In response, an EY spokesperson said via email: “We have not been served this claim and cannot comment.”

Germany’s financial regulator, BaFin, opened a market manipulation probe open against Wirecard in early June.

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata

1y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

2y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine

1y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021

1y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource