The crisis-ridden real estate company is used to bad news. But being unable to find an auditor despite a court order is an unusually severe setback even for Adler.
The auditing company KPMG refuses to audit the balance sheet of the Adler subsidiary Adler Real Estate for the year 2022. The parent company Adler Group informed about this on Wednesday evening in a mandatory announcement for the stock exchange. At the beginning of January, a Berlin court appointed KPMG as Adler’s auditor after the company had obtained a court appointment. However, the mandate cannot be forced through this legal route.
A spokesman for the auditing firm said on Thursday: “KPMG, after a detailed assessment of the decision of the Charlottenburg District Court of January 5, 2023, to appoint KPMG as auditor of the individual and consolidated financial statements for the fiscal year 2022 of Adler Real Estate AG, and taking into account all the circumstances, has concluded not to accept this audit.” So KPMG is not playing along.
Adler‘s unsuccessful search for an auditor is without precedent. The audit engagement is compassionate because the company has long been unable to fully resolve doubts about its financial statements. In addition, the Wirecard scandal from 2020 has shown how serious reputational damage and liability risks can become for auditors when they audit companies with opaque balance sheets.
An explosive history links Adler and KPMG. In the past, the Luxembourg member firm of KPMG‘s international network was responsible for the annual audit of the balance sheets of Adler‘s parent company, Adler Group, headquartered in Luxembourg. KPMG‘s German member firm, in turn, was commissioned by Adler with a unique forensic audit to dispel doubts about the balance sheet figures and serious allegations of a short seller. However, this did not succeed to the desired extent.
Instead, at the end of April 2022, KPMG failed to issue a balance sheet audit certificate for the Adler Group for the 2021 financial year and declined to audit the real estate company further. Since then, Adler has been desperately searching for a new auditor and finally went to court to have an auditor appointed. But even that has not worked out now. For Adler, this raises the anxious question of how investors and creditors can still be convinced to provide the company with urgently needed money in the future under these circumstances. Despite everything, Adler is optimistic and wants to continue working on a solution, according to reports.