It’s safe to say that the Wirecard collapse has rocked the financial industry. And as more details emerge about the company’s fraudulent activities, fingers are being pointed at EY – one of the largest global accounting firms – for failing to catch these discrepancies in their audit procedures. As a result, EY is facing intense scrutiny and backlash from both regulators and shareholders alike. In this blog post, we’ll explore what went wrong with EY’s audits of Wirecard and why this serves as a cautionary tale for all companies relying on external auditors for financial oversight.
EY’s Involvement with Wirecard
EY is facing backlash over its involvement with Wirecard, after the German payments company collapsed into insolvency. EY was the auditor of Wirecard for many years, and is now under investigation by German regulators for its role in the scandal.
Critics say that EY did not do enough to detect or prevent the fraud that led to Wirecard’s collapse. They point to several red flags that were ignored or downplayed by EY, including an accounting scandal at a subsidiary in 2015, and warnings from short-sellers about the company’s finances.
German lawmakers have called for a criminal investigation into EY’s actions, and the firm could faces fines and sanctions if found guilty of wrongdoing. This case is a major blow to EY’s reputation, and raises questions about the effectiveness of auditing procedures at large companies.
The Aftermath of the Collapse
The collapse of Wirecard AG has left many people wondering how such a thing could happen. The German payment processor was once a darling of the fintech world, but it all came crashing down when it was revealed that the company had fabricated its financial statements.
Now, EY is facing backlash for its role in auditing Wirecard’s books. Critics say that the Big Four accounting firm did not do enough to uncover the fraud that took place at Wirecard.
This is not the first time that EY has been criticized for its audit work. In 2015, the firm was fined $10 million by U.S. regulators for failing to properly audit Lehman Brothers’ finances before the investment bank collapsed during the financial crisis.
EY has said that it will cooperate with authorities in their investigation into Wirecard. The firm has also announced an internal review of its audit procedures.
EY’s Response
EY is facing criticism from lawmakers and the public for its role in the collapse of Wirecard. The German payment company filed for insolvency after admitting that 1.9 billion euros ($2.1 billion) in cash was missing from its balance sheet. EY had audited Wirecard’s accounts for years and signed off on them as recently as 2019.
Now, lawmakers are investigating whether EY failed to properly audit Wirecard and whether it should have raised red flags earlier. EY has defended its actions, saying that it followed “appropriate audit procedures” and that it was not aware of any wrongdoing by Wirecard.
Criticism of EY’s Audit Procedures
EY is facing criticism over its audit procedures in the wake of the Wirecard collapse. The German payments company collapsed into insolvency earlier this year, after revealing that nearly $2 billion of cash was missing from its accounts.
EY had been auditing Wirecard for years and had signed off on its accounts as recently as 2019. However, it has now emerged that EY failed to properly scrutinise Wirecard’s finances, leading to questions about the quality of its audits.
In particular, EY is accused of not doing enough to investigate irregularities at Wirecard’s Asian operations, which were responsible for a large portion of the company’s revenue. This has led critics to argue that EY should have spotted the problems at Wirecard sooner.
What’s more, EY is also said to have ignored warnings from whistleblowers about possible fraud at Wirecard. These allegations are currently being investigated by German prosecutors.
If proven true, they would suggest that EY was complicit in the scandal and failed to act in the best interests of investors and creditors. This would be a serious blow to the reputation of one of the world’s biggest accounting firms.
Conclusion
The Wirecard scandal has highlighted the need for stronger audit procedures and better corporate governance. EY’s role in the collapse of Wirecard demonstrates that even a leading accounting firm can make mistakes, which can have serious implications for companies, their shareholders, and other stakeholders. It is clear that the auditing process needs to be reformed in order to restore public faith in financial records and ensure accurate reporting going forward. Companies should take proactive steps to review internal processes and tighten up on their auditing standards if they want to avoid similar issues in the future.
