EY fintech audit angers investors<\/p>\n<\/p>\n
Berlin-based\u00a0lawyer Wolfgang Schirp has been on EY\u2019s trail for months following claims that Wirecard had been overstating its revenues since 2016. As reported by Bloomberg<\/a>, Schirp is preparing a suit\u00a0based on claims that the payment processor improperly booked \u20ac1bn in assets in its 2018 accounts.<\/p>\n After Wirecard\u2019s headquarters was searched for evidence by prosecutors on 7 June, Schirp told the German paper Handlesblatt<\/a> that\u00a0EY had not questioned the lack of balance confirmations for \u20ac1bn in trust assets in its auditor\u2019s report on the 2018 accounts. \u201cEY\u2019s attestation should either have been restricted or at least supplemented,\u201d he said.<\/p>\n At the time of writing, AccountingWEB has not been able to confirm that any formal complaint has been filed.<\/p>\n Earlier this month EY advised its client that it could not complete its review of the 2019 consolidated annual accounts as expected by 4 June 2020.<\/p>\n As a result, Wildcard informed the German DAX market that publication of its consolidated financial statements and the annual press conference will take place on 18 June<\/a>. In spite of the delay, the company expects an unqualified audit opinion.<\/p>\n \u201cWithin the scope of the completed parts of the audit procedures, Wirecard has not yet been informed of any material findings,\u201d the company said. It still expected to match the preliminary results published in February of annual revenues up 38% to \u20ac2.8bn and EBITDA of \u20ac785m (up 40%).\u00a0<\/p>\n Wirecard is the developer of a pioneering mobile payment app called Boon that can make payments independently of any bank and combine them with text and rich media messages.<\/p>\n But after delaying its 2019 results announcement for the third time\u00a0Wirecard runs the risk of becoming a fintech shooting star.<\/p>\n The company\u2019s problems started in January 2019 when a whistleblower told the Wirecard supervisory board that backdated contracts and \u201cround tripping\u201d loans were used to inflate reported revenues from its Singapore and Indian subsidiaries. In October 2019, Wirecard commissioned KPMG to investigate the allegations.\u00a0<\/p>\n According to the company\u2019s statement<\/a> in early May this year, KPMG found no substantial evidence \u201cwhich would have led to a need for corrections to the annual financial statements for the investigation period 2016, 2017 and 2018\u201d.<\/p>\n EY\u2019s forensic and integrity services team had looked into the allegations and found no evidence of round-tripping or corruption. \u201cKPMG has no further findings regarding Singapore beyond those already taken into account in the 2018 financial statements and noted by EY audit in its annual audit,\u201d Wirecard said of KPMG\u2019s findings. The external investigation came to the same conclusion about similar round-tripping allegations in India.<\/p>\n While KPMG was able to substantiate 97% of client relationships during its investigation, the summary of its findings<\/a> said it had not been possible to obtain all of the requested data\u00a0as these documents were mostly retained by Wirecard\u2019s third-party partners.\u00a0<\/p>\n But Schirp and fellow adviser on the case Marc Liebscher of Spath & Parter were not assuaged by the KPMG findings and argued that no evidence been produced to prove the existence of the assets at the heart of their allegations.\u00a0<\/p>\n Highlighting the 3.2m sums provided for audit fees in 2017-18, Liebscher said in May he was \u201castonished\u201d by the fees EY had received. \u201cIf these numbers are correct, the fee appears to be very low in terms of the complexity of the business\/transactions and for a DAX company, which of course does not justify a low standard of auditing, and it certainly does not justify misleading the capital market.\u201d (translated from www.finanznachrichten.de<\/a>)<\/p>\n While the messages coming out of Wirecard held to a \u201cnothing\u2019s out of place\u201d line, Wirecard shares have declined by more than 30% this spring.<\/p>\n In an attempt to assuage shareholder dissatisfaction, Wirecard appointed a new compliance officer, James Freis, who held a similar post with Deutsche Bourse.<\/p>\nAllegations of manipulation<\/strong><\/h3>\n
Critics unconvinced<\/strong><\/h3>\n