Earlier this month, Commerzbank, Germany’s second-largest lender, and DWS Group, Deutsche Bank’s asset-management arm, both decided against using EY Germany as their auditor because they were freaked out by how bad this Wirecard accounting scandal has become.
This was followed by EY Global Chairman and CEO Carmine Di Sibio sending a letter to clients, expressing regret that the accounting fraud at Wirecard was not discovered sooner, that EY would “raise the bar significantly” on the quality of its auditing, and practically begging these clients not to leave EY.
Well Carmine’s letter didn’t convince KfW, Germany’s third-largest bank by assets, which reportedly is mulling ending its relationship with EY.
Bloomberg reported today:
The German government is taking a close look at the auditing of state-run KfW, and is considering dropping EY, according to two people familiar with the discussions. No decision has been made, and the tender remains open, the people said.
A spokeswoman for KfW said the bank is currently reviewing bids in a tender for a four-year deal that will start in 2022, and wouldn’t comment on the ongoing process. An EY spokesman declined to comment.
Bloomberg writes that more clients may jump off the sinking EY ship because “there’s a possible conflict of interest, since many of its German clients were investors in the online payments company [Wirecard] and will try to recoup their investments. Once Germany’s stock market darling, shares of Wirecard have lost 99% of their value since the company’s alleged accounting fraud made global headlines in June.”
Atul Shah, a professor of accounting and finance at City University in London, told Bloomberg that Carmine’s letter “tells you that something more serious is going on and they are worried about a whole spate of defections.”
I mean, if you were one of EY’s clients in Germany, would you want EY to continue auditing your company’s financial statements after this Wirecard mess? I didn’t think so.
Ernst & Young Loses Two German Clients Amid Wirecard Scandal [Wall Street Journal]
Wirecard Woes Mount for Ernst & Young as Clients Cut Auditor [Bloomberg]