The auditing and consulting company EY has not only been fighting for its good reputation since the bankruptcy of the payment service provider Wirecard. After one of the biggest German economic scandals, there is also a risk of high claims for damages, after all investors lost billions that they had invested in the former Dax-Star Wirecard. They were lured by the rapid growth shown by the EY-audited balance sheets. The test reports published by EY were teeming with warning signals, but year after year the testers confirmed that their customer Wirecard had a proper balance sheet. They only refused to give an unqualified certificate for the 2019 annual financial statements.
For EY, it's about repairing the reputational damage as best as possible.
Because auditors live from their good reputation and from the trust that clients and investors place in their work.
To do this, the company would have to explain to its existing and future customers in a comprehensible manner why the failure in the Wirecard case was a one-off slip.
Only then can the public regain confidence without having to fear that similar mistakes will be repeated.
If EY opts for this path of the greatest possible transparency, however, this could reveal details from the Wirecard affair, which would provide the plaintiffs and their claims for damages further points of attack.
So the company is in a quandary.
When looking for a way out, those responsible at EY should consider that it is not just about the future of their company, but that of the auditing profession as a whole.
It would be disastrous if investors and the public came to the conclusion that the auditing industry as a whole can only be trusted to a limited extent.
If EY doesn't reveal the cards, others will.
And with every day that the investigation by the auditor supervision APAS or the public prosecutor's office progresses, the chances for EY of being able to determine the way out of the affair itself decrease.