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EY has banned as auditor in Germany.

 

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EY has been banned from tak­ing on any new lis­ted audit cli­ents in Ger­many for two years over fail­ures in its work for col­lapsed pay­ments group Wir­e­card.

In its rul­ing, the coun­try’s audit watch­dog, Apas, also announced a fine of €500,000 for EY and pen­al­ties of between €23,000 and €300,000 for each of five cur­rent and former employ­ees of the Big Four firm.

Apas said that it «con­sidered viol­a­tions of pro­fes­sional duties dur­ing the audits of Wir­e­card and Wir­e­card Bank from 2016 to 2018 as proven», without giv­ing fur­ther details of the viol­a­tions.

Accord­ing to people famil­iar with the reg­u­lator’s think­ing, there has been no decision on whether EY acted with intent or simple neg­li­gence, a key ques­tion in decid­ing the firm’s crim­inal and civil liab­il­it­ies.

«This pen­alty sends a clear mes­sage,» he added.

Klaus-Peter Nau­mann, chair of Ger­many’s Insti­tute of Pub­lic Aud­it­ors IDW, said: «The two-year ban is quite a severe sanc­tion which we have not seen before in Ger­many».

In the wake of the Wir­e­card scan­dal, Ger­many increased liab­il­it­ies for all aud­it­ors and increased its reg­u­la­tion of the industry. Apas and Ger­man fin­an­cial watch­dog BaFin has been given more powers, and the gov­ern­ment has doubled the max­imum pen­alty for pro­fes­sional mis­con­duct to €1mn.

After Wir­e­card’s col­lapse in 2020, Apas filed a crim­inal com­plaint against sev­eral EY audit part­ners, cit­ing evid­ence that the firm might have know­ingly issued fac­tu­ally incor­rect audit opin­ions. Moreover, it had received unqual­i­fied audits from EY for over a dec­ade.

EY Ger­many said that it would exam­ine the Apas decision «care­fully» but had not yet received the detailed rul­ing. «We regret that the col­lus­ive fraud at Wir­e­card was not dis­covered sooner, and we have learned import­ant les­sons from this mat­ter,» the firm said, adding that it had taken «sig­ni­fic­ant action» to improve its audit qual­ity and risk man­age­ment.

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