Friday Sept 18 2020
hEY Chairmahn Carmine Di Sibio apologies.
EY was late in detecting, at least now they claim they found the fraud, $2 billion in assets ont actually on teh books of Wirecard.
Wirecard filed for bankruptcy in June, three days after acknowledging that $2 billion in assets listed on its balance sheet likely did not exist. In the scandal’s aftermath, Wirecard investors are suing EY, while Germany’s financial regulator, BaFin, is investigating how Wirecard perpetuated the fraud for so long.
EY, which audited Wirecard for a decade, found the $2 billion discrepancy and refused to sign off on Wirecard’s 2019 financial report. The discovery, however, came after numerous media and investor reports about potential discrepancies at Wirecard, as well as issues raised by another firm, KPMG, during an audit conducted at Wirecard’s request.
EY has a lot of explaining to do.
NMC Health, UAE’s largest private healthcare provider; Luckin, China’s largest coffee chain; and German payments company Wirecard are each mired in stunning financial scandals.
One factor they have in common: EY, through its affiliates in various countries, has been the auditor for all three companies.
A British high court also threw dirt on EY’s sullied reputation in April when it ordered EY to pay $11 million to a former partner in Dubai who blew the whistle on an alleged money-laundering scheme by a client and sued for damages and expenses for the retaliation he suffered.
These cases have dealt a series of heavy blows to EY’s credibility and integrity, even though EY has said it was unaware of longtime financial shenanigans by its clients and was duped along with everyone else.
Justice Tim Kerr said in his April 17 ruling that EY officials offered to write the compliance report for Kaloti in a manner that obscured the findings of violations by describing them as “documentary irregularities.”
Bottom Line for ACCT 4311 and 5308 students.
If a local or regional firm made errors of this magnitude, I doubt the firm wold continue to exist. But EY is TBTF Too Big to Fail and continues in business. How could EY miss $314 M in fake sales at Luckin?
Please read both linked articles. Now ask yourself, if the AICPA has a Code of Conduct, well which survives, the Code or EY? These articles do not indicate if anyone lost their job at EY. I doubt they did. If so what is the penalyy for malfeasance?
The reality is that events at EY do not square with all the claims of due professional care and skepticism in the textbook.
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