the sanction of the German Authority for the Wirecard-Corriere.it scandal

EY, a consulting firm with over $54 billion in revenue in 2022, has been barred from taking on new German-listed clients for the next two years, due to its breach of professional duties at payments company Wirecard, which went bankrupt in 2022. summer of 2020 following a hole in the budget of 1.9 billion euros. This was established by Apas, the German auditing supervisory authority, which also fined the oligopolist for 500,000 euros.

The sentence

EY, until 2013 known as Ernst & Young, worked as Wirecard’s auditor from 2016 to 2018, accounting for resources, which in reality do not exist, for almost 2 billion euros. In a statement published on Monday morning, Apas said it believed the breaches of professional duties were proven during the audits of Wirecard and Wirecard Bank from 2016 to 2018. According to anonymous sources cited by the Financial Times and close to the regulator , it has not yet been formally decided whether EY acted willfully or simply negligently. This will be a central element in establishing whether the company’s responsibilities are criminal or civil.
The Apas ruling also specifically affects five members of the EY team, with fines ranging from a minimum of 23,000 to a maximum of 300,000 euros. Seven other former employees escaped punishment because, having already returned their licences, they no longer fall under the agency’s jurisdiction. This fine sends a clear message to those who break the rules, said Konrad Duffy, an expert on white-collar crimes at the German consumer lobby Finanzwende. The supervisor added, it has long taken too soft an approach towards Wirecard and should intervene more decisively. On the contrary, according to the president of the German Institute of Public Accountants IDW, Klaus-Peter Naumann, the two-year ban is a rather severe sanction, which has never been seen before in Germany.

The impact on the sector

The scandal had already led major banks and fund managers, such as Commerzbank, Kfw and Dws, to replace EY with other auditors. The sector as a whole has seen an important strengthening of regulation: Apas and BaFin, the financial supervisory authority, have been given greater powers and the central government has doubled, bringing it to 1 million euro, the maximum fine for professional misconduct.
The judge presiding over the pending criminal trial of former Wirecard boss Markus Braun and two other executives is considering the hypothesis that EY has culpably failed to act in the face of evidence of fraud by the German group of payments. The company, for its part, has made it known that it regrets that the collusive fraud at Wirecard was not discovered earlier stating that they have learned important lessons from this affair and have taken significant actions to improve audit quality and risk management. He also set up a new management team and introduced additional controls. EY Germany is a different organization today, the company said, adding that it cooperated fully with Apas in the investigation.