APAS Actions v. EY: Auditors reinstated license after Wirecard scandal

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nEven before auditing authority APAS had finalized its eagerly awaited decision on the consequences of the Wirecard scandal, four of the auditors affected by the investigation had resigned their professional licences. They are no longer allowed to act as auditors, but they no longer have to fear APAS penalties. The abbreviation Authority of the Federal Office for Economics and Export Control (BAFA) stands for Auditor Supervisory Authority.

The Chamber of Public Accountants (WPK), which maintains the Professional Register of Public Accountants, confirmed to FAZ that four of the people previously on the register had resigned their license as public accountants in January. WPK did not comment on the reasons for this move. Handelsblatt had reported the resignation in relation to the lawyers and also cited a statement by APAS, according to which the authority originally investigated twelve auditors and is now taking action against only eight auditors. Those affected evidently expected such severe punishments that they would have preferred to give up their prior consent. But it is also possible that they want to avoid a longer procedure.

Historic accounting scandal surrounding Wirecard

In the wake of the historic Wirecard scandal from 2020, APAS is conducting massive proceedings against audit firm EY and against 12 current and former EY employees. The action is intended to clarify whether the audit firm and the auditors breached their professional obligations as part of Wirecard’s egregious balance sheet audits. The former Dax company went bankrupt in 2021 after a hole in the balance sheet revealed that EY warned it was too late. EY denied blame and asserted that Wirecard had cheated.

The APAS procedure revolves around the audit of Wirecard’s annual financial statements and consolidated financial statements for the years 2015 to 2018, including Wirecard Bank. APAS evaluated examinees’ extensive working papers and granted examinees affected by the investigations, in some cases an extensive legal hearing. As announced last week by the Federal Office BAFA, which is responsible for the supervisory authority, the decision in Wirecard’s proceedings against EY is expected at the end of March. APAS decision-making room meetings were held in January. At these meetings, APAS staff directly assigned to the investigations reported internally on their findings.

If APAS concludes that EY auditors responsible for Wirecard have breached their professional duties, severe penalties are possible. These can affect not only individual auditors, but also the audit firm EY in Germany. For example, the authority can prevent auditors from practicing their profession for a period of 3 to 5 years or even exclude them permanently from the profession. It is also possible to prevent an accounting firm such as EY from acting for public interest clients for up to 5 years. This means that EY will not be able to audit publicly traded companies or major banks and insurance companies during this period.

After its decision, APAS will send relevant notifications to the relevant persons. They can contest the decisions and go to court against the APAS decision. So it will likely be some time before potential sanctions become fully legally binding.

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