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EY has abandoned an appeal against unprecedented penalties imposed following its audits of fraudulent payments company Wirecard, as the Big Four firm seeks to draw a line under years of crisis in Germany.
Germany’s audit watchdog Apas last year banned EY from taking on new listed audit clients for two years and levied a €500,000 fine over alleged flaws in its audits of Wirecard, which collapsed in June 2020.
EY Germany said on Tuesday that, while it “does not agree with all findings” by Apas, it has decided to “fully comply with the sanctions” in a move that “will bring a conclusion to these proceedings”. The ban on new clients was on hold pending the appeal, which EY has withdrawn and so is likely to take effect immediately, a person familiar with the matter said.
EY and some of its partners still face an array of other legal cases, which are expected to take years to work their way through the Germany courts. The auditor faces law suits from former Wirecard shareholders and the group’s administrator seeking damages over its work for the defunct company. Munich prosecutors are also pursuing an investigation against several EY partners who were in charge of Wirecard audits, after Apas in 2020 identified potential misconduct in a criminal complaint.
Even without the ban on new clients, in the four years since Wirecard crashed into insolvency EY Germany has not won any blue-chip mandates and has lost several. The two-year ban taking effect now means that EY would be free to take on clients from late March 2026, which is just before when many annual shareholder meetings take place, in which auditors are formally appointed.
The number of EY’s audit clients in the Dax 40 index of big companies almost halved last year, from 11 to 6, said Jörg Hossenfelder, partner at the consultancy Lünendonk & Hossenfelder. The remaining clients include Volkswagen and Deutsche Bank, he said. But EY’s overall audit revenue in Germany still rose 8.4 per cent to €714mn in 2023, compared with a year earlier, he added.
Apas, the watchdog, last year concluded that EY violated its professional duties “during the audits of Wirecard and Wirecard Bank from 2016 to 2018”. EY had issued a series of unqualified audits for the disgraced payments group, missing that half of the revenue and the bulk of the profits did not exist.
Apas did not publicly disclose the details of EY’s alleged misconduct. People with direct knowledge of the ruling told the Financial Times that the regulator did not address the question if EY acted with intent or just with negligence, which will be an important factor in deciding the firm’s criminal and civil liabilities.
EY said on Tuesday that it “has learned important lessons from this particular case” as it improved its quality control and puts more focus on preventing fraud. Previously, EY had stated that it regrets that “the collusive fraud at Wirecard was not discovered sooner”.
Last year, Apas also announced that it would impose individual fines of between €23,000 and €300,000 on five current and former EY employees over alleged failures in their work on Wirecard.
Apas did not immediately respond to an FT request for comment.
