The monthly internal webcast of the auditing company EY was not a routine meeting as usual on this Thursday morning. This time the supervisory board and management presented the employees with the lessons the company wants to learn from the Wirecard scandal.

Not only the Chairman of the Supervisory Board Georg Graf Waldersee and the dual leadership of the German EY management, consisting of Henrik Ahlers and Jean-Yves Jégourel, were involved.

Mark Fehr

Editor in Business.

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Also in the group was the former Federal Finance Minister Theo Waigel (CSU), who belongs to an expert commission set up by the EY Supervisory Board in February 2021.

The Commission is to critically monitor the changes that became necessary after the Wirecard insolvency in 2020 in the auditing company responsible for the spectacularly collapsed Dax company.

The commission also includes former federal justice minister Brigitte Zypries (SPD), former Siemens supervisory board member Hans Michael Gaul, and auditor Liesel Knorr, former president of the DRSC accounting committee.

Stumbled over a billion hole

EY is fighting for its reputation because the auditors stumbled across a billion-dollar hole in Wirecard's balance sheet after checking off the business figures year after year.

Such a debacle must not happen to the auditors again, which is why EY has now presented a plan to better identify weak points.

In an internal paper, the company speaks of the "most comprehensive change process" in its more than hundred-year history.

What exactly is EY up to?

The auditing company relies on organizational and technological changes to initiate a culture change in the company.

All this is intended to strengthen the critical attitude that is so important for auditors.

Of the individual measures, the following are particularly noteworthy: Employees, regardless of their level, should be encouraged to speak out unpleasant truths.

Supervisors should set an example here.

In addition, the auditors working at EY should monitor each other more strictly than before.

Therefore, the internal auditor may no longer come from the same location as the auditee.

The aim is to increase the appreciation of colleagues who carry out such internal audits.

They should have more time to do their job.

After the end of a final exam, EY checked the work of the teams even before the Wirecard scandal, but this is now to be intensified with the new measures.

The costs did not play the decisive role here, because according to EY, quality comes before margin.

With the margin, the company is addressing an important point: auditors cannot only look for accuracy, they also have to carry out their work efficiently if the annual audit of a company's financial statements is not to last endlessly.

For this reason, auditors usually focus their efforts on particularly risky areas and businesses of a company to be audited.

It is therefore particularly frightening that the Wirecard auditors noticed the cluster risk in the balance sheet far too late and allowed themselves to be fobbed off with second-rate documents when examining the trust assets worth billions.

Digital magnifying glass for balance sheet detectives

New technology should help prevent such lumps from being overlooked in the future.

EY therefore wants to promote the use of artificial intelligence and technology-supported data analyzes in the final examination.

With digital and automated methods, the auditors should be relieved of routine tasks in order to more easily detect fraud and corruption in companies.

Algorithms can also help to find the needle hidden in the mass of data in a haystack and to uncover anomalies.

The changes planned by EY also affect the job description of the auditor.

The company needs experienced auditors and therefore wants to ensure that employees who do not have a public-law auditing exam can also make their expertise available to the company on a permanent basis.

Even without the time-consuming professional exam, employees will have prospects and opportunities for advancement in the future.

EY wants to reduce the workload of its auditors by hiring additional employees and more strictly controlling overtime.

In the future, EY wants to make whether new customers and orders are accepted more dependent on the resilience and availability of its employees.

However, EY will only win new customers and orders if the company succeeds in salvaging the trust shaken by the Wirecard scandal.

The company now aims to implement the confidence-building measures by the summer of 2023.

The commission, consisting of Waigel, Zypries, Gaul and Knorr, is to check in the first half of 2023 whether the recommended changes have been implemented.