Auditor Report Claims Wirecard Misplaced €1.9 Billion: “Indications of presentation of spurious balance confirmations”

20 Euro Investigation Research

Wirecard AG   (WDI.DE), a Germany based payments and cards platform, has delayed publication of its financial statements due to “indications of presentation of spurious balance confirmations.” The obfuscated statement relates to an apparent audit by EY that uncovered a €1.9 billion discrepancy. EY reports an apparent attempt to deceive the auditor.

According to Wirecard:

“Wirecard AG’s auditor Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Munich, informed Wirecard AG that no sufficient audit evidence could be obtained so far of cash balances on trust accounts to be consolidated in the consolidated financial statements in the amount of EUR 1.9 billion (approximately a quarter of the consolidated balance sheet total).

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.

In light of the above the audit of the annual and the consolidated financial statements 2019 will not be concluded as planned by June 18, 2020. A new date will be announced. If certified annual and consolidated financial statements cannot be made available until June 19, 2020, loans made to Wirecard AG amounting to approximately EUR 2 billion can be terminated.”

Wirecard AG states that it has paid substantial security deposits totaling €1.9 billion into escrow accounts in order to guarantee risk management for participating merchants. The banks managing the escrow accounts are two Asian banks, reports the company.

Markus Braun, CEO Wirecard AG, issued the following statement:

“We are in contact with the trustee present on site. Previously issued confirmations by the banks were no longer recognised by the auditor. All parties involved are endeavouring to clarify the matter as quickly as possible. It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred. Wirecard AG will file a complaint against unknown persons.”

This is not the first time Wirecard has raised eyebrows. In April, the company announced that a review by KPMG concluded there was no incriminating evidence founded for the publicly raised accusations of balance sheet manipulation.

The review by KPMG was spurred by investigative reporting by the FT during 2019 that cast doubt on the firm’s operational integrity.

Shares in Wirecard tanked over 60% upon release of the news.

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