EY's chairman expressed 'regret' that German fintech Wirecard's fraudulent practices were 'not uncovered sooner'
- EY's global chairman has expressed "regret" that the accounting firm did not uncover Wirecard's fraudulent practices sooner, according to a Financial Times report.
- Amid backlash over EY's failure to unmask the insolvent group's $2 billion accounting fraud, chairman Carmine Di Sibio wrote to clients pledging to raise the bar on audits.
- "The public interest clearly requires that much more be done to detect fraud at its earliest stages," Di Sibio said in the letter seen by the FT.
- He said EY would amp up the use of technology to improvise fraud prevention through measures such as "electronic confirmations for audit evidence."
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EY's global chairman has expressed "regret" that fraudulent accounting practices at German fintech Wirecard that created a $2-billion hole in its finances were "not uncovered sooner" by the firm's auditors, the Financial Times reported.
The chairman, Carmine Di Sibio, wrote to clients after the accounting group faced criticism over failing to uncover the scandal-ridden firm's €1.9 billion accounting fraud.
"Many people believe that the fraud at Wirecard should have been detected earlier and we fully understand that," Di Sibio wrote in the letter seen by Financial Times. "Even though we were successful in uncovering the fraud, we regret that it was not uncovered sooner."
Wirecard filed for bankruptcy in June, days after its chief executive Markus Braun was arrested on suspicion of market manipulation and false accounting.
EY audited Wirecard for over a decade, and failed to request crucial account information from a Singapore bank where the German group claimed it held up to €1 billion in cash. That move may have helped uncover its huge accounting scandal, the FT said.
Several investors are readying to sue both Wirecard and EY, which are under investigation by German authorities.
Di Sibio's letter, that has been circulated to EY's global partners, will be sent to senior leadership at companies that work with the accounting group to temper the ongoing backlash.
"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," the chairman wrote.
"The public interest clearly requires that much more be done to detect fraud at its earliest stages."
He said EY would amp up the use of technology to improvise fraud prevention through measures such as "electronic confirmations for audit evidence." That consists of matching the company's banking transaction records with those provided to EY by the bank.
All auditors at EY will receive annual training in forensic accounting, according to the letter.
"I am not going to pre-empt the outcome of any investigations, but I want to clarify a fact that I know is of considerable importance to you and all our clients...When external confirmations for trustee accounts were obtained, the evidence received (including bank confirmations) had been falsified. It is obvious, therefore, that we need innovative techniques and processes to tackle future fraud of this scale," Di Sibio said.