EY gets banned from new audit business in Germany
Editor’s note: On April 11th EY said would scrap plans, known as Project Everest, to separate its advisory and audit services into distinct firms after opposition from partners in EY’s American business, which accounts for 40% of the firm’s global revenue.
EY just can’t get a break. The accounting-and-consulting giant is being sued for $2.7bn by the administrators of NMC, a London-listed hospital operator it had audited and which went into administration after understating debts by $4bn. EY is being investigated by the Financial Reporting Council (FRC), a British regulator; the firm denies the administrators’ claims of negligence. Its plan to unshackle an advisory business constrained by its inability to work with audit clients, codenamed “Project Everest”, is in doubt amid a rebellion by a group of American partners. And on March 31st its German arm received the harshest penalty ever meted out by APAS, Germany’s accounting watchdog, which includes a €500,000 ($548,000) fine and, worse, two-year ban on auditing new publicly listed clients in the country. This is a financial blow to the firm—and an even bigger reputational one.
APAS’s decision comes after a three-year investigation into EY’s role in the demise of Wirecard, a fintech darling turned Germany’s biggest post-war corporate scandal. EY had given Wirecard a clean bill of health for a decade until the company collapsed in 2020 amid allegations of massive financial fraud. APAS now says that it considers it “proven” that between 2016 and 2018 EY violated its duty of care during the audit of Wirecard and Wirecard Bank. Five current and former employees were also fined between €23,000 and €300,000. Seven other employees who were also under investigation escaped punishment by handing back their auditor’s licences. In a statement, the firm said, “EY Germany has fully co-operated with APAS throughout its investigation. We regret…
2023-04-05 09:42:55
Article from www.economist.com