Our Audit of EY’s Apology for Wirecard Finds it Inadequate

Note use of passive voice and that faintest of excuses: it was really, really hard. Not acceptable when the auditor’s primary job is to verify the company’s accounts, and that included detecting fraud.

“Many people believe that the fraud at Wirecard should have been detected earlier and we fully understand that,” Mr Di Sibio wrote in the letter. “Even though we were successful in uncovering the fraud, we regret that it was not uncovered sooner.”

“The collusive acts of fraud at Wirecard were implemented through a highly complex criminal network designed to deceive everyone — investors, banks, supervisory authorities, investigating lawyers and forensic auditors, as well as ourselves,” said Mr Di Sibio. “The public interest clearly requires that much more be done to detect fraud at its earliest stages.” He said EY would increase its use of technology to improve its audits in the wake of the scandal, including “using electronic confirmations for audit evidence” such as “matching the company’s records of banking transactions with those provided to EY by the bank”. Recommended FT InvestigationsInside Wirecard Wirecard and me: Dan McCrum on exposing a criminal enterprise EY will also use more third-party data and information during its audits and carry out greater checks on “management probity”, according to the letter. All EY auditors will also be given annual training in forensic accounting.

EY says they will do better, including matching the firms’s reported transactions to bank records. Why weren’t they doing that already, especially given the complaints about the company from investors?

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