Ernst & Young Faces Backlash Over Whistleblower Report On Wirecard

One day after an Ernst & Young (EY) whistleblower’s warning about potential fraud at Wirecard was made public, the global accounting firm is facing backlash, the Financial Times (FT) reported.

On Tuesday (Sept. 29), it came to light that an EY auditor alleged the global accounting firm was warned as far back as 2016 that senior managers at the German payments company may have committed fraud and one had tried to bribe an auditor.

Details of the allegations were included in an unpublished section of a special audit into Wirecard by KPMG. FT reported that in the audit, KPMG said the 2016 allegations were not properly investigated by EY.

EY approved the company’s financial accounts without reservations for more than a decade.

Once celebrated as a rising star in the FinTech world and once valued at $28 billion, Wirecard filed for insolvency in June. It admitted that 1.9 billion euros ($2.1 billion) said to have been deposited in two Philippines banks did not exist.

According to FT, a former Wirecard investor, who requested anonymity, called the auditor’s handling of the whistleblower’s allegations “just unbelievable.”

“It has just become significantly more likely that we are going to sue EY,” the investor told FT Wednesday (Sept. 30).

Danyal Bayaz, a member of the German Parliament from the Green Party, told the newspaper the allegations against EY are “grave” and would be investigated in a parliamentary inquiry set to begin next week.

Fabio De Masi from the Die Linke party called it an “Arthur Andersen” moment referring to the Enron’s auditor that collapsed after the energy group was revealed to be a fraud nearly 20 years ago, FT reported.

“Wirecard investors who suffered losses now have an even better reason to sue EY for damages,” Marc Liebscher, a Berlin lawyer who has filed hundreds of lawsuits against EY at a court in Stuttgart, Germany, told FT.

Berlin lawmakers are considering whether to bar the firm from public contracts.

“The new revelations are likely to make it much harder for EY to prove that its annual audits were conducted properly and that the audit opinions were in line with the law,” Heribert Hirte, a law professor at Hamburg University and a member of the Christian Democratic Union Party, told FT.