The European Parliament’s Committees on Economic and Monetary Affairs (ECON) and Legal Affairs (JURI) questioned several experts on Tuesday 23 March on the lessons to be learned from the accounting scandal that hit German payment services provider ‘Wirecard’ in 2020 (see EUROPE 12512/15).
In early March, the European Securities and Markets Authority (ESMA) issued a series of recommendations to the European Commission for amendments to the Transparency Directive as a result of this case (see EUROPE 12670/13).
In the view of Katja Langenbucher, professor at the Goethe University in Frankfurt and author of a study for the ECON Commission on the implications of this scandal (see EUROPE 12597/17), adding new rules is not necessarily required, but rather the problems of implementation for the current rules need to be addressed.
Her study recommends, among other things, the establishment of a single European supervisor for capital markets. A hub-and-spoke architecture that would preserve the role of national agencies as competent authorities, but make them accountable to a single European centre, would be a good option, she said.
The “Big Four” in the firing line
MEPs also questioned the experts on the need for reform of EU audit rules, with a focus on the concentration of influence in the “Big Four” (PwC, Deloitte, EY and KPMG).
According to Matthias Hauer, member of the Bundestag and of the board of inquiry set up on the ‘Wirecard’ case in Germany, the EU would indeed benefit from creating a framework to allow other audit firms to participate in this market.
Dan McCrum, one of the investigative journalists at the Financial Times who helped to shed light on the affair, highlighted the obvious mistakes made by EY. “Wirecard’s accounting was fraudulent in part since at least 2010 and possibly earlier”, he pointed out.
In his view, there is a need for reform of the auditing rules, with a more regular rotation of auditors and a clear separation between the audit and consultancy sides to avoid conflicts of interest.
In order to prevent the company itself from financing the audit company that will audit it, one option would be to ask large companies to pay a contribution to a fund, which would then pay the audit companies and thus act as a screen, according to Daniela Bergdolt, spokesperson for the German Private Investors Association Deutsche Schutzvereinigung für Wertpapierbesitz e.V. (DSW).
In a statement sent before the hearing, MEP Markus Ferber (EPP, Germany) said that the ‘Wirecard’ case was an “idiosyncratic failure of one supervisor, not a systematic failure of European supervision or regulation”. In his view, calls for a European supervisor or audit sector reform are therefore not the appropriate response. (Original version in French by Marion Fontana)