Germany sanctions EY over Wirecard
Germany's audit watchdog has sanctioned Ernst & Young for its failure to detect the Wirecard fraud. The German branch of EY was fined and banned for two years from auditing new publicly-listed companies and major financial institutions, signaling a tougher enforcement climate for professional services firms.
- The specific penalty from Germany's audit watchdog, APAS, consisted of a €500,000 fine and a ban on taking on new publicly-listed audit clients for two years, which concluded at the end of March 2025. Five individual EY auditors also received penalties for their roles in the flawed audits from 2016 to 2018. - Wirecard filed for insolvency in June 2020 after admitting that €1.9 billion ($2.1 billion) in cash, which was supposed to be held in trustee accounts, likely did not exist. The company owed creditors almost $4 billion. - A German parliamentary inquiry found that EY had failed for years to request key account information directly from the Singapore bank where Wirecard claimed to hold up to €1 billion, relying instead on documents provided by a third party that were later found to be forgeries. - The scandal triggered significant regulatory reform in Germany through the Financial Market Integrity Strengthening Act (FISG). This legislation expanded the powers of the financial supervisor BaFin, giving it the authority to conduct forensic audits and directly intervene in public companies. - Wirecard's former CEO, Markus Braun, is currently on trial in one of Germany's largest post-war fraud cases, while the company's former COO, Jan Marsalek, remains a fugitive. - In addition to the regulatory sanctions, EY faces a wave of civil litigation. German lender Commerzbank is suing the auditor for €200 million in losses, and thousands of investors have joined class-action style proceedings against the firm. - EY has maintained that it was deceived by a highly sophisticated and elaborate fraud. However, the presiding judge in the criminal trial of former Wirecard executives stated that if EY had handled things differently, the fraud would have been uncovered more than a year earlier.
