Revisionsgesellschaften
No major accounting scandal without lawsuits against the auditor
—
How “Enron” changed the world of auditors 20 years ago and why it continues to turn things around with “Wirecard” or “Greensill” as it did back then.
—
The German Wirecard scandal is currently flying around the ears of the EY auditing company.
—
“The auditors have the best insurance and are best to pack because they have documents, working papers and a place of business. You can’t just move to the Bahamas or transfer the woman’s fortune. “
These are the words of Jakob Baer, the former head of Kpmg Switzerland. It was no coincidence that he spoke it in the summer of 2003 at a time when the Swiss economy was slowly beginning to recover from the aftermath of the great stock market crash.
Billions of dollars from affect
What Jakob Baer sounds like in the interview at the time is, for example, the bankruptcy of the stock market bogeyman Werner K. Rey. In their initial anger, the creditors of his bankrupt Omni Holding had demanded billions in damages from the auditing company Deloitte. In the end, they were satisfied with 16 million francs. The auditors may be good at lamenting, but just as well, if not better, they know how to defend their interests through legal channels.
After every economic crisis, the auditors are often busy dealing with the troubled past for a long time. After the recession of the 1990s, hundreds of claims for damages against major audit firms were filed in Swiss courts. Therefore none has disappeared.
That changed 20 years ago with the bankruptcy of the fraudulent US energy company Enron. The auditing company Arthur Andersen had found Enron’s bill to be good for years, despite many alarming signals. At the same time, the auditors earned a lot of money for all kinds of consulting services.
In 2002 Arthur Andersen should have asked himself in a US court whether her auditors might have turned a blind eye to critical points in view of the lucrative consulting fees. Arthur Andersen no longer wanted to take this exam. The company went out of business in 2002.
Since then there have only been four major auditors in the world – the “Big Four”. After that, they went to work more carefully when it came to separating conflicts of interest. But in the financial crisis the problems became evident again, which led the EU to stricter laws. Audit mandates with a term of more than ten years have also been taboo for us since then. In order to maintain the independence of the auditors, there has since been a maximum turnover per customer as well as new restrictions on the acceptance of consulting mandates.
The next candidate is called Greensill
Nevertheless, major accounting scandals like the one in the past – FlowTex (Germany), WorldCom, Enron (USA), Parmalat (Italy) – will always remain audit scandals in the future. One of these is currently in progress at German Wirecard. Another case could be the Greensill bankruptcy.
In its 2019 annual report, the Swiss Federal Audit Oversight carefully warned of the consequences of the low interest rate policy: “In particular, very large amounts of money are being invested in the current environment for acquisitions of companies, which can lead to excessive goodwill in the balance sheet. In this environment, the critical examination by the auditors is of central importance for the credibility of the financial reporting. “
–
