Wirecard’s auditor EY received a 500k EUR fine and was banned from taking on new audits

According to recent reports, Germany’s accounting watchdog, APAS, has issued a fine against EY, a company that served as Wirecard’s auditor between 2016 and 2018. EY received a 500,000 EUR ($541,650) fine in the aftermath of the Wirecard scandal. On top of that, the company was also banned from taking on new audits for companies of public interest in the next two years.

The fall of Wirecard and EY’s relationship with the company

EY remarked that it was informed by APAS that the investigation of the company had been completed. However, EY itself was not briefed on the details of the decision. After that, APAS stated that it had imposed sanctions on the company that audited Wirecard, as well as on five individual auditors.

It is worth noting that APAS did not refer to EY by name in its statement. However, EY was named as Wirecard’s auditor in the company’s annual report in the mentioned period.

Wirecard itself previously filed for insolvency three years ago, in June 2020. At the time, it owed its creditors nearly $4 billion. Meanwhile, the company revealed that there is a 1.9 billion EUR hole in its accounts. According to EY, this was the result of a rather sophisticated global fraud.

Initially, the company was founded nearly 25 years ago, in 1999. Its purpose back then was to process payments for a number of websites, primarily those that offered adult content and gambling. After that, it evolved into a fintech firm, and in time, it even became a member of the country’s blue chip DAX index.

Consequences for EY

While investigating the company, APAS discovered multiple breaches of duty by the company’s auditor, regarding the scandal, as it noted in its statement. With the new ban on taking on audits for firms of public interest, the auditor is forbidden from joining any tenders for audits that involve such firms. The ban will last for the next two years, and it will prevent EY from working with any listed companies in Germany. The same is true for the majority of the financial sector, meaning insurance companies, banks, and alike.

Again, APAS never mentioned EY by name, but Wirecard’s reports did. EY has been an auditor for Wirecard for more than a decade before it refused to sign off on the company’s final results for 2019. This was just before the company’s downfall. Apart from EY’s 500,000 EUR fine, APAS has also fined five auditors at the company, issuing smaller fines that range from $25,000 (23,000 EUR) to 326,000 (300,000 EUR).

It is also worth noting that, while EY was banned from taking on new companies, it can still keep its existing auditing mandates.