EY has elevated its variety of multinational audit shoppers in Germany regardless of the high-profile collapse of Wirecard that noticed the agency sharply criticised for failing to identify a €1.9bn fraud.
Since 2017, EY has doubled its market share of auditing for members of the nation’s blue-chip Dax index, based on analysis by consultancy Lünendonk & Hossenfelder. By 2021, for the primary time, it should have seven of the 30 Dax-listed teams as audit shoppers.
Amongst them are heavyweights like Deutsche Financial institution, Volkswagen, Siemens, Munich Re and Deutsche Telekom. EY additionally audits Lufthansa and Airbus, that are listed within the mid-cap MDAX.
Traditionally, the agency has had solely three or 4 Dax shoppers.
“EY in recent times efficiently established itself because the third energy amongst German blue-chips — a phase that was historically dominated by KPMG and PwC,” stated Jörg Hossenfelder, accomplice at Lünendonk & Hossenfelder.
Altering auditor is a posh and expensive course of that may take a number of years in Germany. Nonetheless, audit and governance consultants count on that fallout from the Wirecard scandal will restrict EY’s skill to draw extra shoppers.
The agency is now beneath investigation by Germany’ audit regulator Apas and faces lawsuits from Wirecard buyers.
Its Large 4 rival KPMG, in a confidential addendum to a particular audit of Wirecard, discovered EY missed the prospect to look extra carefully into suspected accounting fraud in 2016.
“The harm to EY’s popularity will probably be immense,” stated Hansrudi Lenz, a professor of accounting at Würzburg College.
Christian Strenger, a company governance specialist and former head of asset supervisor DWS, predicted EY will wrestle to win new shoppers.
“After Wirecard, supervisory boards will discover it very tough to argue in favour of the agency,” he stated.
Up to now, solely DWS and German lender Commerzbank — each listed however not members of the Dax — have stated they are going to drop EY as auditor. Each corporations suffered large losses within the Wirecard collapse and are contemplating suing EY.
Deutsche Financial institution, which switched to EY in 2020 after greater than 60 years with KPMG, stated it should “carefully monitor all additional developments and analyse their impression on the financial institution”.
VW chief monetary officer Frank Witter informed shareholders in September that the group’s appointment of EY — after 70 years with PwC — was “primarily based on a variety course of that takes a number of months” and added that the carmaker had “no findings that might forged a doubt on the choice course of”.
Volkswagen’s auditing contract is among the many most profitable on the Dax. The group paid PwC €19m for audit work in 2019, in addition to €33m for tax consultancy and different providers.
Dax-listed MTU Aero Engines, which has used EY since 2014, stated it has no plans to alter auditor till the top of the 10-year time period.
“MTU’s enterprise mannequin is sort of advanced and it wants appreciable trade experience for auditors to train their duties successfully and effectively,” the corporate stated. “We think about the present auditors at EY as certified in that respect. MTU’s AGM adopted this view in August.”
Lufthansa stated it had no plans to alter its auditor. Siemens, EY and KPMG declined to remark.
EY’s growing dominance within the blue-chip audit market has been pushed by three components, stated Dirk Hildebrandt, an unbiased Cologne-based auditor: new guidelines that oblige listed corporations to alter their auditor extra usually, aggressive pricing by EY and an absence of alternative for multinational corporations.
Multinational companies want an auditor with a world community and expertise of coping with advanced company constructions. This stage of service can typically solely be supplied by the Large 4 corporations of EY, Deloitte, KPMG and PwC.