From WSJ: The once-high flying electronic payments company disclosed a $2 billion accounting hole.
The Wirecard AG scandal is leading to more exits, with the head of Germany’s accounting regulator stepping down and auditor Ernst & Young naming a new leadership team in the country.
Edgar Ernst, president since 2011 of Germany’s Financial Reporting Enforcement Panel, said he would step down from his role at the end of the year. The change at the top of the organization, which is a private-sector body that does routine checks of companies’ financial filings, will help it move forward from a public debate around Mr. Ernst’s supervisory board mandates, said Rolf Pohlig, chairman of the board.
Those mandates, at companies including wholesaler Metro AG and travel giant TUI AG , have come under increased scrutiny as the FREP and other regulatory bodies are facing questions about their oversight of Wirecard.
The once-high flying electronic payments company in June disclosed a $2 billion accounting hole, stating that the money missing from its balance sheet probably doesn’t exist. This confirmed earlier reports by banks that said they never held the funds, and triggered various investigations into the company and several German watchdogs. Senior executives including Chief Executive Markus Braun left the business.
Meanwhile, Wirecard’s longtime auditor EY on Thursday said it appointed two new executives to head up its German business. Hubert Barth, who led the professional services firm in Germany since 2016, will transition to a European role, EY said, but didn’t specify further. The company named Henrik Ahlers, until now the managing partner for tax for Germany, Switzerland and Austria, as well as Jean-Yves Jégourel, global assurance vice chair, to take over from Mr. Barth.
EY also said it launched a new quality improvement program and established an independent expert commission led by former German finance minister Theo Waigel to help revamp its work. “EY is aware of the loss of trust caused by the Wirecard case,” the company said in a statement.
It couldn’t be learned who might succeed Mr. Ernst at the helm of the FREP, as it didn’t immediately respond to a request for comment. The organization is facing significant changes after the country’s justice ministry last year canceled its contract with the FREP, effective Dec. 31, 2021.
There is a continuing debate about whether the ministry will appoint another body to take over FREP’s responsibilities or not. The Berlin-based organization was set up in 2004 in response to various accounting scandals and fraud cases, including at now-defunct Enron Corp., but has suffered from staffing shortages and other constraints.
The German government in December proposed a new law aimed at strengthening financial markets. The legislation suggests giving companies’ supervisory boards enhanced rights, strengthening auditor independence and overhauling BaFin, the country’s market watchdog, whose president was dismissed in January. BaFin employees would be barred from trading financial instruments, the draft said.
Under the proposal, companies also would be obliged to rotate auditors every 10 years. Professional-services firms would have to separate their auditing and consulting businesses, mirroring a similar proposal by U.K. regulators. Auditors would bear extended liability and face harsher penalties in case of misconduct, according to the draft legislation.