Anfang Juni WC massiv Schützenhilfe gegeben gegen den KPMG Bericht
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§EY prepared an unqualified audit opinion on Wirecards accounts in early June, conditional on a few actions from the company that weeks later collapsed in one of Europe's biggest accounting frauds.
The Big Four firm delivered a draft version to Wirecard of its official audit opinion, which accountants typically share with clients to give them the opportunity to fact check numbers and assessments.
The draft opinion rejected allegations made by whistleblowers as well as serious concerns raised by a KPMG special audit into Wirecards accounting which was published in late April.
KPMGs report, which Wirecard commissioned last year to allay concerns over its accounting, had stunned investors after the firm was unable to verify the existence of half of the payment groups business and 1bn of cash. The groups shares tumbled by a third in the week following its publication.
In the draft opinion dated June 2, a copy of which has been reviewed by the FT, EY said that based on the findings of our audit, the attached annual financial statements comply in all material respects with German commercial law applicable to corporations and give a true and fair view of the net assets and financial position of the company.
The opinion said it represented the status quo of the still ongoing audit. In a statement to the FT, EY said it was was not prepared to provide an unqualified audit opinion in early June and at that point its work on the audit was ongoing.
The draft was sent to Wirecards management in early June as the group, once lauded as a rare European tech champion, faced mounting pressure to have its 2019 accounts signed off. Wirecard had set a press conference for June 18 to release the results.
But a week later the company collapsed into insolvency, shaking corporate Germany and triggering a criminal probe into the groups former executives as well as an EU investigation into BaFin, the countrys financial regulator.
EYs draft opinion did not mention any conditions for an unqualified audit. However, people familiar with the matter told the FT that securing such a verdict from EY was contingent on transferring 440m in four batches from escrow accounts in the Philippines, purportedly overseen by a trustee in Asia on behalf of Wirecard, into the groups accounts in Germany.
Other documents reviewed by the FT show that EY had demanded such a transfer in May after the KPMG report was published.
Since Wirecards collapse, pressure has been building on EY, which issued unqualified audits for the payments group for a decade.
Wirecard unravelled in late June when its third-party acquiring business TPA was exposed as a sham. The business was said to process payments in countries where the German group lacked the licences to do so and account for all of its operating profit.
In its draft opinion, EY stated that its extended audit procedures found no evidence that the TPA business in Asia was problematic. Within the scope of the audit, we satisfied ourselves that the accusations [regarding third-party acquiring] of which we became aware were followed up and assessed by measures taken by the management board of Wirecard, EY noted.
It added that in the course of our extended audit procedures, no indications have arisen that would suggest any violations of the law in relation to [the third-party acquiring business].
In the document, EY also dismissed arguments raised by KPMGs special audit that Wirecard should not be allowed to fully consolidate sales and profits generated from its third-party business partners and that the money held in escrow accounts in Asia should not be treated as its cash.
Typically, in any normal auditing process, only minor details rather than the auditors fundamental view change at such a late stage, said Hansrudi Lenz, professor of accounting at Würzburg university, adding that he found it highly surprising that EY in early June still seemed to consider giving Wirecard an unqualified audit.
In a statement to the FT, EY said that the release of Wirecards 2019 results were delayed multiple times because EY Germany informed the company that it had not been able to complete its audit work, adding that it was ultimately the work of EY Germany that exposed the fraud related to Wirecard.
The fraud was uncovered after EY turned to the head offices of the two Philippine-based banks which, according to Wirecard, held the money. EY was informed by the banks in mid-June that account confirmations confirming such balances were spurious.
Last month EY said that third parties had provided the firm with false documentation in connection with Wirecards 2019 audit.
Wirecard declined to comment.