The German subsidiary of the big four auditing firm EY must wait to undertake new audit mandates with public interest groups for two years. In addition, the state supervisory authority APAS imposed fined for EY and involved auditors.
In the Wirecard scandal, the state supervisory authority in Germany wants to bar the auditing company Ernst & Young (EY) from taking on significant new contracts for two years. EY Germany will be temporarily banned from taking on new mandates from listed companies, credit institutions, and insurers due to breaches of duty in auditing annual reports of the collapsed payment services provider, the Auditor Oversight Service (APAS) announced on Monday.
Fines would also be imposed on the company and several auditors. The decisions are not final.
Specifically, the regulator imposed a fine of €500,000 on EY in addition to the engagement suspension. This is the maximum amount applicable under the law at the time. Five auditors are to pay fines of between 2€3,000 and €300,000. The proceedings against seven other auditors were discontinued because they have returned their professional licenses and can no longer be prosecuted by APAS under the law.
Existing mandates of the auditors are not affected, according to APAS. Those affected can appeal the decision to the regulator and take legal action if an appeal is rejected. APAS emphasized that these are exclusively consequences of professional supervision, which is not binding for other proceedings.
Wirecard collapsed in June 2020 when it became known that 1.9 billion euros were missing from its cash register. EY had signed off on the balance sheets of the group from Aschheim near Munich, which was listed in the leading Dax share index at the time, for years.
EY Germany said APAS had informed that it had concluded its investigation. As soon as the regulator officially communicated the details of its decisions to the company, EY would carefully review them. It said it had cooperated fully with APAS throughout the investigation and had learned lessons from the case. Comprehensive measures have been taken to strengthen audit quality and risk management. APAS, based at the German Federal Office of Economics and Export Control (BAFA), said it examined auditors’ work on the financial statements of Wirecard AG and Wirecard Bank AG from 2016 to 2018.
The supervisory authority considers it proven that the audit firm and several of its employees violated their professional duties.
Leave a Reply