German payment group longtime auditor intervened just a day before the KPMG report was released in April, raising doubts about a company now exposed in one of the country’s largest post-war accounting frauds .
KPMG was unable to verify the existence of activities which, on paper, represented half of Wirecard’s revenues and all of its operating profit. Two months later, Wirecard collapsed after this third-party acquisition company (TPA), which allegedly performed payment processing for the company in countries where it did not have operating licenses, broke down. turned out to be a sham.
Documents reviewed by the Financial Times show that EY and Wirecard became aware of two KPMG audit plans ahead of its publication. The investigation was commissioned by Wirecard in October in order to allay concerns about the group’s accounting and was overseen by the supervisory board.
On April 27, a day before the publication of the long-delayed report, Andreas Budde and Martin Dahmen, auditors at EY, expressed to Wirecard their concerns about the way third-party activities were presented in a second draft of the audit. that they had seen. this morning.
“In our opinion, the subject of third-party acquisition must be placed in a global context,” they wrote to the then CEO, Markus Braun, to the other members of the management board of Wirecard and to the chairman of the board of monitoring Thomas Eichelmann, according to a document seen by the FT. “Reports solely on KPMG’s forensic investigation carry the risk of misinterpretation,” they noted.
They added that the second audit project contained information inconsistent with that “provided by the company”. [Wirecard] or with the conclusions of our audit ”. In the documents consulted by the FT, MM. Budde and Dahmen did not go into details or recommend any specific changes to the project.
During the audit of Wirecard’s 2018 results, the TPA activity was a particular focus of MM. Budde and Dahmen. They gave him good health.
Last month, the Financial Times reported that EY had not requested crucial account information for more than three years from a Singapore bank where Wirecard claimed it had up to € 1 billion in species allegedly linked to TPA activity – a routine audit procedure that could have been discovered. the vast fraud. Wirecard in June revealed that cash “doesn’t exist” and that the APR has been distorted to investors for years.
EY’s intervention came at a time when Wirecard was facing increasing pressure to have its 2019 financial results approved by its long-term auditor. The once-high-profile company was legally required to release audited results by April 30, or face fines and damage to its reputation.
When KPMG’s special audit findings were released on April 28, they stunned shareholders who had been repeatedly assured by Wirecard that nothing untoward had been found. Wirecard shares ended the day down 26%.
Germany’s worst accounting scandal in decades has turned the spotlight on EY, which has granted Wirecard unqualified audits for more than a decade. Apas, the country’s audit body, has started to look into the work of EY. Last month, EY said third parties provided the firm with false documents as part of Wirecard’s 2019 audit.
Four days before the publication of the KPMG audit, one of the documents consulted by the FT shows that MM. Budde and Dahmen told the Wirecard board and Mr. Eichelmann that a first draft revealed “differences of opinion” between himself and KPMG, as well as between Wirecard and KPMG, on “several matters which have been raised ”.
EY also told the German group that additional measures suggested by its supervisory board and KPMG to clarify the issues risked adding further delays to the audit of 2019 results.
In an email sent on April 24, EY informed Wirecard that it was still missing “essential documents” that it had been demanding for months, including evidence that the money had been deposited into escrow accounts as well as evidence. the existence of a number of customers.
People familiar with the different versions of the report told the Financial Times that the parts regarding the TPA section in the published report did not differ from the draft. In the published report, KPMG said it could “neither state that the [third party acquiring] revenues exist and are correct [ . . .] nor declare that the income does not exist and is incorrect ”.
In a statement to the FT, EY said: “It has been widely reported that the independent forensic investigation undertaken by KPMG was commissioned by the management and supervisory boards of Wirecard. EY Germany was not a party to the forensic investigation and KPMG is solely responsible for the content. ”
Mr. Budde and Mr. Dahmen, via EY, declined to comment.
KPMG and Wirecard declined to comment.