DrHe returned to focus on audit firm EY after a controversial document from the now-defunct Parliamentary Inquiry into the Wirecard case became public. It concerns the previous confidential report of the commission’s special investigator, Martin Wambach, who, as an auditor, took a professional look at EY’s work in auditing Wirecard budgets. Members of the Bundestag had given EY auditors disastrous certification in their final report in June, based on Wambac’s findings.
Therefore, much of the content of the Wambach Report was known, but not the report itself. That has changed since Handelsblatt published the 168-page document online Thursday night. The business newspaper justified the move, among other things, by wanting to create transparency for Wirecard investors who have been hurt in one of Germany’s biggest economic scandals. The Wambach report was also paid for with tax money, so that the public had a right to its content.
Big doubts about reliability
The former Dax Group was forced to file for bankruptcy in June 2020 after the company admitted that 1.9 billion euros were missing from its balance sheet and EY refused to approve annual financial statements. However, in previous years, EY had always validated Wirecard’s budgets, despite many warning signs. In light of the scale of the scandal and the high level of effort involved in auditing, doubts arose about whether the auditors acted reliably.
EY has contradicted the allegations from the start and considers itself a victim of wirecard fraud. In a statement on Friday, the audit firm described the publication of the report as a disregard for the rule of law and a violation of personal rights. Therefore, one examines the criminal steps. Not only has the Wirecard scandal damaged EY’s good reputation, but auditors are often sued in court. At the company’s headquarters in Stuttgart, there are 320 lawsuits for investors with claims over 53 million euros. There are about 650 Wirecard lawsuits in Munich’s First Regional Court, but the plaintiffs have not been successful in 115 cases.
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According to Mark Tongler of the DSW Investor Protection Society, the Wambach report, which has become public, gives investors very valid arguments for taking action against EY now more than ever. DSW read from the document that EY did not comply with the testing guidelines. Investor advocates want to pool claims against EY at a Dutch foundation, and the project ultimately aims to settle. “The Wambach report confirms our earlier arguments,” said Martin Koehler of the law firm Telb. Affected investors are advised to seek their rights in court. Friendly solutions with EY are currently unrealistic.
EY should be involved in the clarification
Appealed to Klaus-Peter Neumann of the audit institute IDW EY. “For the sake of confidence in the profession, it will be important for EY to take an active role in the investigation,” he told FAZ, and the APAS auditor and prosecutor’s offices of the investigation should present the findings soon. As early as September 2020, APAS reported breaches of professional obligations by EY auditors to the Berlin Public Prosecutor’s Office: anyone who, in accordance with commercial law, incorrectly reports when auditing an annual financial statement, withholds material or issues an auditor’s opinion Who is incorrect in content, faces up to three years in prison.
Meanwhile, leads are gathering in the Munich I Prosecutor’s Office, which is investigating a large-scale investigation into the Wirecard accounting scandal. Senior Prosecutor Anne Leiding confirmed that the authority had received several reports of breach of professional duties and of aiding and abetting fraud. Lyding said Wambach’s reports “will of course be included in the investigation.” But here, too, prosecutors cannot know to what extent there is a suspicion of a preliminary crime.
When asked by FAZ, a spokesperson for Michael Jaffé, Wirecard’s insolvency manager, he did not want to comment. “We don’t comment on that,” he said on Friday. However, Jaffe is likely to look closely at the claimants’ reactions. As an insolvency administrator, his job is to evaluate potential liability claims against Wirecard’s former advisors and auditors. If EY can demonstrate serious omissions, as mentioned several times in the Wambach report, or even intent, it will greatly improve Jaffé’s negotiating position.
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