EY needs to lift the bar after the Wirecard account scandal
By Huw Jones
LONDON (Reuters) – Global accounting firm EY said on Tuesday it regretted that it did not earlier discover fraud at German payment company Wirecard and that it would improve the verification of customer information through increased use of technology.
German regulators are reviewing EY's role as auditor for Wirecard, which collapsed in June after a € 1.9 billion hole was discovered in its books.
"Many people believe that Wirecard should have discovered the fraud sooner and we fully understand that. Although we managed to uncover the fraud, we regret that it was not discovered earlier," said Carmine Di Sibio, Global Chairman and Chief Executive of EY on a note to customers.
EY said it will mandate the use of data analytics for fraud testing, use more external data like social media, and match banking with data provided by the bank.
The use of innovative technologies can help to identify fraud by management more quickly in the future.
"All of this raises the bar significantly and goes beyond currently accepted professional standards," said Di Sibio.
Accountants are not primarily responsible for detecting fraud, but pressure on accounting firms to improve their game has increased in the UK following corporate scandals at construction company Carillion, retailer BHS and cafeteria chain Patisserie Valerie.
A UK government sponsored report last year recommended that auditors should be asked to look for fraud.
EY said Germany's investigations into the audits it conducted are expected to take several months.
"The collusive fraud cases at Wirecard were implemented by a highly complex criminal network that is supposed to deceive everyone – investors, banks, regulators, investigative lawyers and forensic auditors as well as ourselves," said Di Sibio.
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