ENTERTAINMENT

The auditing company EY is facing the "Arthur Andersen Moment"


The auditing company EY is facing a potential "Arthur Andersen moment" because the whistleblower warned them of fraud at the German payment company Wirecard FOUR YEARS before they went bankrupt

  • Politicians and disgruntled investors lined up to put pressure on the accountants
  • EY was further dragged into the Wirecard scandal this week amid new allegations
  • The auditing company audited Wirecard's books for more than a decade
  • The German payment firm gave in after admitting that £ 1.7 billion had disappeared

Accounting giant EY is under attack on several fronts after a whistleblower raised Wirecard's fraud alarm four years ago.

Politicians and disgruntled investors put pressure on the big four accountants allegedly facing their own "Arthur Anderson moment".

EY was further drawn into the Wirecard scandal this week when the Financial Times published claims that a whistleblower reported signs of potential fraud in 2016.

The accounting firm audited Wirecard's books for more than a decade until the German payment company went bankrupt earlier that year after admitting that £ 1.7 billion had disappeared.

Accounting giant EY is under attack on several fronts after a whistleblower raised Wirecard's fraud alarm four years ago

Green MP Danyal Bayaz said EY will be in the spotlight when members of the Bundestag drill down into the Wirecard affair next week.

And Fabio De Masi's MP, who represents the leftist party Die Linke, said, "In the worst case, EY could face its Arthur Andersen moment," a nod to Enron's auditors that is known to collapse after the energy giant appeared Amounted to.

That the whistleblower pointed to fraud but allegedly went unresponsive to it was rated "simply unbelievable" by a Wirecard investor, who told the FT it paved the way for them to sue EY for massive losses.

The allegations, which included an attempt to bribe an EY employee in India, surfaced during a special audit of the competing auditing firm KPMG in Wirecard, which was seen by the FT.

The accounting firm audited Wirecard's books for more than a decade until the German payment company went bankrupt earlier that year after admitting that £ 1.7 billion had disappeared

The accounting firm audited Wirecard's books for more than a decade until the German payment company went bankrupt earlier that year after admitting that £ 1.7 billion had disappeared

Heribert Hirte, MP for Angela Merkel's CDU, said: "The new allegations will likely make it much harder for EY to prove that the annual audits were properly conducted and that the audit rulings were in line with the law."

EY has acknowledged that issues related to potential fraud and bribery concerns were reported by an employee.

However, it insists that the claims have been thoroughly investigated by both the accounting firm and forensic teams.

In January 2019, Wirecard was hit by allegations in the FT that its Singapore office made fake accounting records to replenish its revenue.

EY investigated these claims and gave Wirecard management a clean health certificate.

Additional allegations – including the fact that the finance team tried to increase sales and profits at its units in Ireland and Dubai – prompted Wirecard to commission KPMG to conduct an external audit last fall.

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