Ernst & Young (EY), the global accounting firm hired to verify Wirecard’s financials, failed to request crucial information from a Singapore bank where the German payment processor claimed it had up to 1 billion euros ($1.1 billion) in cash, the Financial Times reported.
That routine audit procedure could have uncovered the vast fraud at the suburban Munich company, the report said.
“The big question for me is what on earth did EY do when they signed off the accounts?” a senior banker at a lender with credit exposure to Wirecard told the newspaper.
The accountancy firm, which has audited Wirecard since 2010, has been thrust into the center of the scandal around $2.1 billion in missing funds that Wirecard said it deposited in two Philippines banks. The island nation’s lenders, BDO Unibank Inc. and the Bank of the Philippine Islands, have said the money never entered the country.
Markus Braun, the 50-year-old Wirecard founder and CEO, was arrested this week on charges of manipulating the market and misrepresenting accounts. He posted bail and has denied any wrongdoing.
Sources told the Times that between 2016 and 2018 EY did not check with Singapore’s Oversea-Chinese Banking Corp. (OCBC Bank) to confirm it held large amounts of cash on behalf of Wirecard. Instead, EY relied on documents and screenshots provided by a third-party trustee and Wirecard itself, the newspaper reported.
A senior auditor at another firm told the Times securing independent confirmation of bank balances was the first thing students learn at audit school.
OCBC declined to comment, the paper reported.
Another source said Wirecard has no banking relationship with OCBC and that the FinTech’s former Singapore-based trustee does not have an escrow account with the bank.
The Financial Reporting Enforcement Panel (FREP), Germany’s accounting watchdog, is probing Wirecard’s balance sheet.
FREP declined to comment.
Wirecard had told its auditors that the money moved late last year from OCBC to banks in the Philippines.
“I’m totally baffled by the lack of competence and responsibility displayed by EY,” Akshay Naheta, a SoftBank executive who led an investment in Wirecard last year, wrote on Twitter last week. “As an organization that is meant to protect all stakeholders, creditors and shareholders, in companies, both public and private, they have materially failed in their fiduciary duties.”