German Agency Criticizes EY’s Audits of Wirecard

A German regulator has reportedly concluded that EY’s audit work and quality control regarding the now-defunct payments firm Wirecard was marked by “grave” and “repeated” violations of professional duties.

The regulator, Apas, said this in a review that was published Friday (April 19) and ended a multiyear investigation, the Financial Times (FT) reported Friday.

EY did not immediately reply to PYMNTS’ request for comment.

In a comment published with the review, the firm said that while it will not legally challenge the decision, that doesn’t mean EY agreed with Apas’s findings, per the FT report.

Wirecard, a German FinTech company, collapsed in 2020 after reporting that half its revenue and 1.9 billion euros ($2 billion) in corporate cash did not exist, according to the report.

EY had been the company’s auditor for nearly 10 years, per the report.

Apas said in its review that EY’s audit opinions were “objectively inaccurate” and that its internal quality controls had experience “grave failure,” according to the report.

The regulator added that these failures occurred over several years and in different areas, the report said. It did not express a view on whether these failures were intentional.

It was reported in December that Wirecard’s insolvency manager, Michael Jaffé, filed a lawsuit in a court in Stuttgart against EY, claiming 1.5 billion euros ($1.6 billion) in damages over EY’s role in auditing Wirecard’s books.

The lawsuit alleges that EY failed to identify the fraudulent activities that led to Wirecard’s downfall.

EY has consistently denied any wrongdoing and rebuffed claims against it for damages related to Wirecard.

The firm said in June 2020, at the time Wirecard had to file for insolvency, that Wirecard knowingly gave false statements and was in this midst of “elaborate and sophisticated fraud involving multiple parties around the world.”

In September 2020, EY’s global chairman and CEO, Carmine Di Sibio, wrote in a letter to clients that the firm would do a better auditing job.

“Many people believe that the fraud at Wirecard should have been detected earlier and we fully understand that,” Di Sibio wrote. “Even though we were successful in uncovering the fraud, we regret that it was not uncovered sooner.”