A lot of trust was lost in the Wirecard scandal.
(Photo: action press)
The authorities around the world are currently taking on the work of the auditors. Whether it’s the US Securities and Exchange Commission, the British government or the EU Commission: the industry is coming under great pressure from many sides. The concern of the regulators is as important as it is legitimate: they want to prevent scandals like Wirecard from repeating themselves. Investors should regain confidence in the correctness of balance sheet attestations. The examiners have a duty here.
Since the collapse of the payment service provider Wirecard, the auditing industry, which previously received little attention, has been hit by one round of regulations after the other. It’s time for reviewers to step out of victimhood—and go on the offensive with their own suggestions. After all, they also care a lot about the goal of strengthening trust.
That’s why it’s important that the auditing company EY now takes the initiative and plays through a split internally – the very company that suffered immense damage as Wirecard’s auditor.
Becoming independent and separating high-margin consulting business and official audit work would be tantamount to a revolution in the business of the “Big Four”. PwC, EY, KPMG and Deloitte are fully integrated multi-service providers for their clients.
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But is such a split also the best way to achieve the overarching goal of better auditing? This is supported by the fact that a clean separation is created between advising companies and the final audit. An organizational separation of the two businesses would free the auditors from the constant accusation of amalgamation of interests – according to the motto: “Anyone who earns big money with advice no longer checks carefully”.
Advisory teams are becoming increasingly restricted
However, there is no solid evidence for this suspicion, and the EY/Wirecard case does not provide it either. In any case, it is now the case that the auditor of a company is practically no longer allowed to advise it at all. The legislature has put a stop to this more and more. Increasing regulation means that companies’ advisory teams feel more and more restricted.
In this respect, a split, as EY is playing through, could be liberating for the consulting teams. For more correct and credible balance sheet certificates, however, there is basically no need for a split. What is more important is that the auditors have to prove convincingly that they are serious about their core business of statutory auditing. It’s about billions of investments that are needed for a modern, artificial intelligence-supported audit.
But it is also quite simply about the self-image as an auditor who fulfills his professional duty with all the means at his disposal: namely to approach the client with a fundamentally critical attitude. That’s what EY missed at Wirecard.
With the unchecked expansion of the high-margin consulting business, the auditors have themselves come under suspicion that they are neglecting their traditional task of auditing the balance sheet. Now is the time for them to act and prove them wrong. In view of the importance, the goal can only be: Save auditing!
More: After accounting scandals: Great Britain plans stricter rules for the audit of accounts