News analysis
Audit scandal – Wirecard’s finance chief admits forging documents
In an audit scandal that made international headlines, the former head of Wirecard’s accounting department has admitted to forging documents under pressure from the auditor KPMG to provide evidence of transactions.
What’s happened?
Wirecard’s former chief financial officer, Stephan von Erffa, reportedly told prosecutors that he falsified the documents after being pressured by the auditor to prove a €50m payment had been made.
Due to pressure from KPMG during the special audit, the accounting chief created a fake, back-dated email and corresponding financial documents.
How did the audit scandal come to light?
After The Financial Times raised suspicions of balance sheet manipulation, Wirecard hired KPMG to audit its accounts to clear itself of the allegations.
Von Erffa reportedly admitted to prosecutors that he falsified back-dated emails and escrow authorisations after KPMG’s auditors demanded documents proving the €50m payment had been authorised.
According to reports in the Financial Times, Wirecard’s financial chief told prosecutors the €50m transaction was genuine, claiming the act was an isolated incident and was not meant to falsely represent the company’s finances.
The collapse of Wirecard
The collapse of Wirecard, valued at over €24bn at its peak, shocked Germany’s political and financial elite.
EY, Wirecard’s long-standing auditor, failed to uncover the fraud for years. At the same time, the German financial regulator BaFin protected Wirecard from short sellers, and prosecutors pursued critical journalists, claims the FT.
Why was the board at Wirecard so ineffective?
Read this excellent analysis of Wirecard’s board: Wirecard pre- and post-scandal: A board effectiveness analysis