Mike Masoud
October 31, 2021
On October 26, 2021, the Financial Times published a report by Olaf Storbeck entitled EY and Wirecard: anatomy of a flawed audit. The following is my opinion on this significant report that I also posted on LinkedIn:
I do not think the parliamentary inquiry committee’s conclusion was accurate enough to reflect on what EY potentially did at Wirecard. The committee said, “EY refrained from key audit procedures or was satisfied with poor audit evidence.”
Based on this FT news report and the earlier FT reports, I think that EY Germany committed, at the minimum, gross negligence in conducting the audit of the financial statements of Wirecard for many years. The German courts shall hopefully and ultimately reveal what happened.
The findings of the report prepared by Rödl & Partner and submitted to German parliamentary inquiry into the scandal must have stated in detail the significant weaknesses in the design and implementation of the audit procedures.
Did EY Germany maintain professional skepticism throughout the audit?
Did EY Germany apply the confirmation auditing standard with respect to cash and bank balances?
Did EY Germany maintain its independence in appearance and in fact?
Did EY Germany apply ISA 240 effectively: THE AUDITOR’S RESPONSIBILITIES RELATING TO FRAUD IN AN AUDIT OF FINANCIAL STATEMENTS?
I have no doubts whatsoever that EY Germany had an audit failure for many years of its audit of Wirecard. The question is not why it was too late for EY Germany to uncover the fraud of Wirecard.
The real question is whether EY global knew about the red flags of Wirecard and did not respond professionally as expected. Did not EY global read the FT reports about Wirecard in 2015 and 2016? There must be a culture failure and audit quality failure at EY globally. Time will tell!
