EY reports €1.9bn ‘missing’ at Germany’s Wirecard

German payments company Wirecard has been forced to delay publication of its annual results again, after auditor EY said it could not confirm the existence of cash balances totalling €1.9bn (£1.7bn)

The fintech giant, which is listed on the Dax stock exchange, announced that EY had said that no sufficient audit evidence had been obtained relating to cash balances on trust accounts. The sums involved represent approximately a quarter of the consolidated balance sheet total.

In a statement, Wirecard said: ‘There are indications that spurious balance confirmations had been provided from the side of the trustee respectively of the trustee's account holding banks to the auditor in order to deceive the auditor and create a wrong perception of the existence of such cash balances or the holding of the accounts for to the benefit of Wirecard group companies.

‘The Wirecard management board is working intensively together with the auditor towards a clarification of the situation.’

The uncertainty over the cash balances means that Wirecard’s annual results will not be published as previously announced on 18 June. A new date has yet to be announced.

The company said: ‘If certified annual and consolidated financial statements cannot be made available until June 19, 2020, loans made to Wirecard AG amounting to approximately €2bn can be terminated.’

The latest delay follows two earlier postponements of Wirecard’s annual results.

In February the company reported preliminary sales revenue growth of 38% to €2.8bn and preliminary EBITDA of €785m, a 40% increase and said it assumed ‘there will be no significant deviations from these figures’. It indicated final results would be available at the end of April, but this was then postponed.

At the end of May, Wirecard said its annual results would be published on 18 June and that ‘the company expects an unqualified audit opinion’.

KPMG investigation

Wirecard’s accounting has been under scrutiny for some time. In 2019, the Financial Times published articles alleging that Wirecard’s Singapore office tried to inflate revenue through forged and backdated contracts, and that there were accounting issues within its Asian operations. The paper also claimed that Wirecard’s staff had allegedly appeared to conspire to inflate sales and profits at subsidiaries in Dubai and Dublin and mislead EY.

In response, Wirecard brought in KPMG to conduct a ‘special audit’.  At the end of April it announced that KPMG’s report indicated ‘incriminating evidence for the public allegations of balance sheet forgery has not been identified’.

Wirecard reported: ‘With respect to all four areas of the audit - Third Party Acquiring business (TPA), Merchant Cash Advance (MCA)/Digital Lending as well as the business activities in India and Singapore -  no significant findings have been made, which would require an adjustment of the annual accounts 2016-2018.

‘In the course of the audits of the annual accounts for the years 2016-2018 the available documents and audit measures were sufficient for the proof of the revenues in the Third Party Acquiring business. According to the increased forensic requirements of the audit by KPMG, however, not all data could be obtained that would have been required to proof the revenues in these years, because the required data are primarily in the control of third parties.

‘Since Wirecard meanwhile controls the necessary data itself, more than 200 million item of data relating to December 2019 sets have been provided to KPMG for a forensic audit. This audit has not revealed any deviations between the reported revenues and account balances.’

The company said that KPMG had identified documentation and organisational weaknesses during the audit period, which it already knew about. Wirecard said it had addressed these by establishing a Global Compliance Organisation and with the support of external consultants.

A spokesperson for EY Germany told Accountancy Daily: 'In connection with our audit procedures on Wirecard’s 2019 financial statements, we are unable to obtain sufficient evidence to confirm cash balances on trust accounts in the consolidated financial statements in the amount of €1.9bn.

'We have information indicating that spurious or falsified balance confirmations have been provided in relation to these accounts.

'Accordingly, we reported these matters to the Wirecard management and supervisory boards.

'Our audit work is ongoing and we have no further comment at this time.'

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