Dusseldorf In the Wirecard scandal, the auditor EY is now coming under increasing pressure. According to legal experts, the company will face a wave of lawsuits from investors. They accuse the longstanding Wirecard auditor of errors in the balance sheet audit and in communication with the public.
“We see the allegations substantiated by the latest developments,” said Wolfgang Schirp of Schirp & Partner, a law firm specializing in capital market law, on Monday. His law firm already filed a lawsuit against EY at the beginning of June and, according to its own statements, is currently registering “keen interest from shareholders” who want to join the lawsuit.
Another lawsuit against EY has been announced. The Dutch investor association European Investors – VEB considers EY to be liable for the Wirecard and has already invited the audit firm to out-of-court discussions.
In both cases, EY is demanding compensation for the losses that investors have made with Wirecard shares. It is about the difference between the purchase price and the current value. The fall in prices since Thursday has increased the damage, said Schirp. EY did not want to comment on the lawsuits.
In essence, the accusation is: How could EY overlook the fact that the accounts specified by Wirecard do not exist at two Philippine banks? EY has been the Group’s auditor for eleven years.
Basically, auditors must first rely on the supporting documents provided by the companies. You check the processes by spot checks and also the client’s internal control systems. But they don’t work with forensic methods like an investigator does. In the case of suspicious cases, however, the examiners must act and can restrict or refuse attestations.
In the case of Wirecard, the evaluation of the internal control system should be the main focus, explains the Würzburg business professor and examination expert Hansrudi Lenz. After all, checking only on the basis of supporting documents is difficult in the business that is geared towards millions of transactions.
However, it was not EY, but competitor KPMG, that revealed obvious deficiencies in Wirecard’s internal processes in a special report. The same applies here: KPMG was able to work with forensic investigation methods that an auditor does not use.
No thorough examination?
Nevertheless, the question arises whether EY made mistakes in the Wirecard check. The plaintiffs represented by the law firm Schirp accuse the company of not having examined the balance sheet sufficiently in several places. EY would have had reason to have to expand or limit the certificate at several points.
The core of the lawsuit is the examination standard 302 applicable in Germany: Among other things, it regulates the obtaining of bank confirmations from the auditor.
However, because this standard also leaves scope, it is not easy to provide evidence. In addition, the confirmations via the accounts listed by Wirecard in Asia are a “very well done fake”, as it is said in circles of auditors.
The European Investors – VEB shareholders’ association, on the other hand, aims to communicate with EY. It accuses the company of not informing the capital market early enough about problems in the Wirecard balance sheet.
This will also be difficult to prove for EY. EY can claim that it was ultimately their examiners who uncovered the forgeries – KMPG failed in the special forensic examination. But in addition to the lawsuits, the company will probably also have to answer to Apa’s German auditor supervision.
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