London
CNN
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Big-4 accounting firm EY has been banned from auditing companies of public interest in Germany for two years over its failures as the auditor of Wirecard in the years before the digital payments company’s staggering collapse.
Germany’s auditor supervisory authority APAS said Monday that it had imposed sanctions on the auditor of Wirecard over “breaches of professional duty” between 2016 and 2018, without naming EY. EY had audited Wirecard for more than a decade before refusing to sign off on its final results for 2019, precipitating the company’s downfall.
The supervisory body also fined the Wirecard auditor €500,000 ($544,000) and issued smaller fines — between €23,000 ($25,000) and €300,000 ($326,000) — to five individual auditors at the firm. The auditing ban applies to new rather than existing auditing mandates.
EY did not respond to a CNN request for comment.
Germany’s Wirecard filed for insolvency in 2020 following the discovery of a $2 billion accounting fraud that regulators, the company’s supervisory board and its longtime auditor failed to spot. Investors rely on auditors for assurance that a company’s accounts provide a true reflection of its earnings.
Journalists, whistleblowers and skeptical investors had all questioned Wirecard’s accounting for years, but Germany’s banking regulator pushed back forcefully against investigative reporters and critical hedge funds.
In the end, Wirecard admitted that roughly a quarter of its assets — €1.9 billion ($2.1 billion) in cash — probably never existed. CEO Markus Braun resigned and was arrested on suspicion of artificially inflating the company’s balance sheet and sales through fake transactions.
Braun went on trial for fraud in a German court in December, Reuters has reported. Braun has denied wrongdoing.
— Inke Kappeler and Anna Cooban contributed reporting.
