Auditor oversight Apas expands investigations against EY

The Apas need not share this view. In the same meeting, Barth confirmed to the politicians that he had already received an envelope personally addressed to him on February 6, 2019, sent by a whistleblower who described dubious events at Wirecard in Singapore.

Barth said he had informed the supervisory authority and subsequently contacted Wirecard personally again and again. After “extensive discussion” and “careful consideration”, however, he and his employees decided not to resign from the Wirecard mandate.

Now this decision sticks to the company like bad luck. “I can assure you: the entire EY organization and I personally wish that we could have proven the alleged fraudulent activities at Wirecard earlier,” said Barth. “We have been investigating very hard internally for months why this was not the case … We are aware that considerable efforts are required to gain the trust of our clients, other market participants and the public in the quality of the To ensure the final examination on a permanent basis. “

When asked about the Apas’ investigation, his defense counsel told the Handelsblatt: “In the proceedings, Apas presented the facts to us from their current point of view and asked us to comment. We are now following that. In the opinion of Mr. Barth, he has fulfilled all professional obligations. We are optimistic that the proceedings will ultimately be discontinued. “

EY audited the payment service provider’s balance sheets from 2009 to 2018 without any qualifications. For 2019, too, it looked as if an attestation would be possible. A special audit ordered by the Wirecard supervisory board by the EY competitor KPMG then raised massive doubts about the balance sheets.

The KPMG auditors stated, for example, that it was not possible to make a statement about significant parts of the sales revenues of the past few years as to whether they existed or not. A little later it became clear that alleged trust assets amounting to 1.9 billion euros did not exist in the Philippines. Wirecard filed for bankruptcy in June 2020. Shortly before, EY wanted to settle 24,495 working hours for the audit of the 2019 balance sheet.

When asked, Apas did not want to provide any information about its proceedings against EY. The supervisory authority started preliminary investigations in October 2019, and in May 2020 it became a formal professional supervision procedure. In September 2020, Apas filed a criminal complaint with the Berlin Public Prosecutor’s Office. Reason: In the audit reports from EY “could have been incorrectly reported” or “significant circumstances could have been concealed”. This resulted in a preliminary investigation against two examiners led by the Munich Public Prosecutor’s Office.

Apas examines meticulously

The Apas EY investigation team should now include at least five employees. They examine all of Wirecard’s annual and consolidated financial statements from 2015 for compliance with statutory and professional requirements. According to insiders, the suspicions of the Apas against the EY examiners are massive.

An EY spokesman did not want to comment on the ongoing process when asked and pointed out that “professional supervision procedures are standard procedures. In order to ensure the correctness of final audits, the authority is legally obliged to carry out investigations in the event of abnormalities.

Multiple indications of violations by the auditor

There were plenty of abnormalities in the work of EY for Wirecard. Among other things, the supervisory authority is checking whether EY has not investigated a contradiction in the statements made by the Wirecard management board. In addition, she suspects that the auditors may have acted compliantly with the Wirecard management in the attestation for 2016.

Martin Wambach came to a similar assessment. In April 2021, the board of directors of the Institute of Auditors (IDW) appointed by the Bundestag investigation committee issued a devastating job reference to EY in a 168-page special report – the report suggests various violations of professional obligations.

“There are starting points that the auditor has not fully implemented the requirements of the IDW audit standards in the area of ​​audit planning and execution,” Wambach stated. In several cases, no action checks could be found at EY, although there was only incomplete financial information from Wirecard, there were uncertainties in the accounting and the figures in the business books did not match. Sometimes there was not even a discussion about it at EY.

The Wambach Report was originally intended to be open to the public, but was stamped secret on the advice of EY. The Handelsblatt recently published it anyway. EY then filed a criminal complaint against an unknown person.

EY, on the other hand, considers its own performance to be flawless. “We would like to emphasize that the EY auditors have carried out their audit procedures to the best of their knowledge and belief,” said an EY spokesman. “The audit team took all the information and allegations seriously at all times and followed up on them in a targeted manner.” It is now “EY’s top priority to help clarify the Wirecard case”.

Broad scope of possible sanctions

It is up to others to decide whether EY is part of the solution or part of the problem. Should the Apas discover a breach of professional duty, the sanctions range from a complaint, possibly combined with a fine of up to 500,000 euros, to a temporary ban on certain activities, to an exclusion from the profession. According to the Apas, 67 professional supervision procedures were concluded in 2020, 27 of them with a sanction.

In addition to individual auditors, audit firms can also be affected by professional measures. According to information from the Handelsblatt, Apas is checking whether the company had created all organizational requirements for compliance with the audit status, but in the case of Wirecard it may not have been met.

The Green finance expert Lisa Paus, who was also a member of the Wirecard investigative committee, already has possible consequences in view: “If the allegations are further substantiated, it would be correct if the supervision of the EY auditor prescribed a pause for reflection and new business for a certain period of time prohibited with companies of public interest. “

In fact, the APAS can prohibit not only the individual auditors, but also an audit firm for a time from taking over new business from companies of public interest. This would not only affect a company like EY financially far more than a reprimand in connection with a fine. The loss of reputation would also be immense.

The Apas still needs time for the EY analysis. A spokesman told the Handelsblatt: “According to current estimates, a decision by the competent ruling chamber ‘professional supervision’ in the matter can be expected in autumn 2022.”

Criticism of Apas too

The Apas was already in the twilight at Wirecard. When the then EY boss Barth reported to the authority in February 2019, it is said to have relied on EY to clarify the allegations from Singapore itself.

From circles of the Bundestag Committee of Inquiry it said: “The Apas has stated that EY has everything under control. This documents that EY has allowed Wirecard to fob off with delaying information and that Apas apparently assessed this as an appropriate project. ”At the time, Apas commented that at this point in time it was not able to detect any breach of the EY auditor’s professional duties.

Apas also made negative headlines when its then head Ralf Bose himself traded Wirecard shares in April and May 2020 without disclosing this. Bose had to take his hat off.

Now there is renewed criticism of the Apas – because of the long duration of the proceedings. Special investigator Martin Wambach said in an interview with Handelsblatt: “For everyone involved, it would certainly be desirable if the Apas came to results more quickly.”

The authority opposes this. The procedure is carried out quickly, efficiently and with “highest priority”. She refers to the large number of issues in connection with audits of several financial years and the extensive documents and very large databases that have to be evaluated. The length of the procedure is also largely determined by EY’s multiple opportunities to comment.

In fact, EY is said to have recently submitted a pleading of more than 600 pages, as the Handelsblatt learned from defense circles. The auditing firm Wirecard relies on the law firm Freshfields for legal advice.

More: EY is preparing for the defensive battle in the Wirecard balance sheet scandal