- According to a report in the Financial Times, the global chairman of EY has expressed "regret" that the accounting firm did not detect Wirecard's fraudulent practices earlier.
- Chairman Carmine Di Sibio wrote to customers who pledged to raise the bar for audits.
- "The public interest clearly requires that much more be done to detect fraud at its earliest stages," Di Sibio said in the FT's letter.
- He said EY will increase the use of technology to improvise fraud prevention through measures such as "electronic verification of evidence".
- You can find more stories on the Business Insider homepage.
EY's global chairman has expressed "regret" that fraudulent accounting practices at German fintech Wirecard, which created a $ 2 billion hole in its finances, were "not exposed earlier" by the company's auditors Financial Times reported.
Chairman Carmine Di Sibio wrote to clients after the accounting group was criticized for failing to uncover scandal-ridden accounting fraud of 1.9 billion euros.
"Many people believe that the Wirecard fraud should have been discovered sooner, and we fully understand that," wrote Di Sibio in the Financial Times letter. "Although we managed to uncover the fraud, we regret that it was not discovered earlier."
Wirecard filed for bankruptcy in June, days after its managing director Markus Braun was arrested on suspicion of market manipulation and incorrect bookkeeping.
EY has audited Wirecard for over a decade and could not request Important account information for a bank in Singapore where the German group claimed to hold up to 1 billion euros in cash. That move may have helped uncover the huge accounting scandal, the FT said.
Several investors are preparing to sue both Wirecard and EY, which are being investigated by German authorities.
Di Sibio's letter, distributed to EY's global partners, is being sent to senior executives at companies that are working with the accounting group to help mitigate the ongoing setbacks.
"The collusive acts of fraud at Wirecard were implemented by a highly complex criminal network that is supposed to deceive everyone – investors, banks, regulators, investigative attorneys and forensic auditors as well as ourselves," wrote the chairman.
"The public interest clearly requires that much more be done to expose fraud at its earliest stages."
He said EY will increase the use of technology to improvise fraud prevention through measures such as "electronic verification of evidence". This consists of matching the company's banking operations with those given to EY by the bank.
All auditors at EY, according to the letter, receive annual training in forensic accounting.
"I am not going to anticipate the outcome of any investigation, but I want to clarify a fact that I know is of material importance to you and all of our customers … When external certifications were obtained for escrow accounts, the evidence was received ( including bank confirmations) has been forged, so it is clear that we need innovative techniques and processes to combat future fraud of this magnitude, "said Di Sibio.
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(tagsToTranslate) Markets (t) Finances (t) Economy (t) Markets (t) Stocks (t) Wirecard (t) EY (t) German (t) Fintech (t) Europe (t) Accounting fraud (t) Accounting scandal