EY told Wirecard that KPMG audit ‘risked misinterpretation’
EY reportedly told Wirecard that a draft of an independent audit lacked “context” and could lead to wrong conclusions about the firm.
EY, which has been the German payments firm’s auditor for over a decade, intervened a day before the publication of the KPMG report in April, which cast doubt over Wirecard, according to the Financial Times.
KPMG could not verify the existence of activities which Wirecard said accounted for half of its revenue and operating profit. By June the firm had collapsed after its third-party acquiring business was discovered to be fraudulent.
The Financial Times reported that EY and Wirecard saw two drafts of KPMG’s audit prior to its publication. The German firm commissioned the report in a bid to alleviate concerns with how the firm dealt with its accounting.
A day after the report was published, EY auditors Andreas Budde and Martin Dahmen told Wirecard they were concerned with how the third-party business was presented in a second draft of the audit.
“According to our view, the topic of third-party acquiring needs to be put in an overall context,” they wrote to former chief executive Markus Braun, other members of Wirecard’s management board and supervisory board chairman Thomas Eichelmann. “Reporting solely on KPMG’s forensic investigation carries the danger of misinterpretation,” they noted in a document seen by the FT.
They added the second draft of the KPMG report contained information that was “inconsistent” with what Wirecard had provided.
EY has come under scrutiny over the scandal as the FT last month reported the auditor had failed to carry out a standard procedure on Wirecard for more than three years.
A report by the FT claimed that between 2016 and 2018 EY did not check with Singapore’s OCC Bank to confirm it held large amounts of cash on Wirecard’s behalf. Instead, EY relied on documents and screenshots provided by Wirecard and a third-party trustee.