Insolvent firm Wirecard hires forensic accountants

German payments business Wirecard has hired a firm of forensic accountants to investigate the accounting scandal that led to its collapse in June this year. 

In particular, the forensic experts have been asked to look into two missing deposits in banks in the Philippines totalling more than $2 billion and nearly $4 billion that it owes creditors.

The forensic accountants will also investigate which Wirecard employees and board members knew about potentially criminal acts, with their findings expected to assist with litigation against Wirecard workers and officers.

One unnamed Wirecard executive, who was arrested when the scandal broke, has already pleaded guilty to fraud and money laundering, according to reports.

Other arrests have included the firm’s Chief Executive Markus Braun and Olliver Belenhaus, who ran the CardSystems Middle East division, on which a large part of the scandal centres.

According to the Financial Times, around half of the missing $2 billion was held in accounts under CardSystem’s purview.

According to Reuters, the probe is being carried out with the consent of the insolvency administrator, who is trying to sell Wirecard subsidiaries in Singapore, Indonesia, South Africa and Turkey.

Proceeds from the sale of those operations could total as much as $114 million. The administrator is also seeking buyers for Wirecard’s European operation and Wirecard Bank, which is currently valued at $183 million.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “An unusual aspect of this case is that it appears that Wirecard purported to have non-existent cash deposits in various overseas bank accounts that one would have expected to have been uncovered during the audit of its annual financial statements.

The very large sums of money that are involved make it difficult to understand how the Company was able to dupe the auditors into accepting the existence of the fictitious accounts.

With millions of dollars likely to be left owing to creditors, the administrators may well consider taking legal action against the auditors, who have been accused by some commentators of limiting the scope of their investigations in an attempt to meet tight budgets and timetables.  According to the Financial Times, “audit fees in Europe are far below those in the US. Audits of Russell 3000 index companies in the US cost 0.39 per cent of company turnover on average. Those in Europe average just 0.13 per cent, while for German companies it is a feeble 0.09 per cent.

One way in which the Big Four often try to keep fees to a minimum is to delegate audits to junior staff.  A stark example was the last audit of BHS before its sale by Philip Green and its subsequent collapse.  The PwC partner, Steve Denison, recorded only two hours of work auditing the financial statements, delegating the work to less experienced members of his team.  Even his number two had just one year’s post-qualification experience.”

Posted in Blog, The Forensic Blog.