“Spurious balance confirmations had been provided”
The CEO of German payments and IT services specialist Wirecard has resigned with immediate effect — a day after the firm admitted that EY auditors couldn’t find €1.9 billion euros (£1.7 billion) of cash on its balance sheet.
Markus Braun will be replaced by James Freis as interim CEO.
“There are indications that spurious balance confirmations had been provided from the side of the trustee respectively of the trustee’s account holding banks to the auditor in order to deceive the auditor and create a wrong perception of the existence of such cash balances,” Wirecard told investors.
Wirecard employs 5,800+ persons in 26 countries.
The Bayern-headquartered company, founded in 1999, says it over 313,000+ companies rely on its services, including “well-known large, medium-sized, and small enterprises as well as start-ups in the travel and mobility, retail, e-commerce, banking, and telecommunications industries.”
It names Orange, Getty Images and Fitbit among its marquee customers.
The announcement on Thursday left Wirecard unable to publish its quarterly reports: its inability to provide convincing quarterly reports as scheduled means loans of up to €2 billion can be terminated today (June 19).
As shares collapsed over 70 percent, the company said it is “in constructive discussions with its lending banks with regard to the continuation of the credit lines and the further business relationship.”
Wirecard, once on of Germany’s corporate darlings, is no stranger to auditing issues: in 2018 internal whistleblowers triggered an investigation by the company’s own compliance team into suspicious transactions in Asia. Among a series of allegations at the time: that Wirecard’s deputy chief financial officer and its head of Treasury approved four money transfers from Munich to Singapore, which appear designed to artificially inflate profits.
As the FT reports — the paper has broken a number of investigative stories on the firm’s finances — its accounting practices have been controversial since 2008. An anonymous report by short-sellers in 2016 triggered a fresh collapse in its share price, which subsequently quadrupled as the company pushed back hard against the allegations.