EY’s role in auditing the collapsed German Fintech company Wirecard has been criticised for being severely flawed. The accounting firm earned nearly 10 million euros for audit fees over a 10-year period.
EY is accused of failing to ensure that there was $2 billion in bank accounts in the Philippines. It also needs to explain why five different partners approved accounts in five separate years.
This is just another example of the use of creative accounting techniques, which often end up as fraudulent transactions. The Gupta family saga in South Africa, the collapsed UK outsourcer Carillion, the outsourcer Serco and of course the Italian firm Parmalat which is remarkably similar to the recent scandal in Wirecard.
The full story of the Wirecard scandal is yet to be revealed but it highlights the need to be aware of the warning signs or red flags which are shown in company data prior to the company collapsing.
If you want to know more about how to spot these red flags, then look at our training programme covering creative accounting and misrepresentation which covers these issues using examples of companies which have failed.