24 outubro 2020

EY e os escândalos contábeis

This year, $2 billion is missing at a German fintech company, $300 million of sales has been found to be fabricated at a Chinese coffee chain and $5 billion in undisclosed debt has been uncovered at two related companies listed in the U.K. Together, the incidents cost shareholders of the companies roughly $30 billion.

All had been audited by Ernst & Young. Last year, EY also audited office-space company WeWork, which nearly collapsed after fumbling a planned initial public offering.

EY is one of the Big Four accounting firms, whose audits are meant to give investors confidence in companies’ figures. EY missed red flags or failed to aggressively pursue them at some of the companies ahead of their scandals, and for the most part it was outsiders who raised questions first, a review based on publicly available documents and interviews with people close to the events shows. Now, regulators are scrutinizing EY’s work.

The EY audit clients that faced financial issues were German payments processor Wirecard AG WDI 23.31% ; China’s Luckin Coffee Inc. LKNCY 3.62% ; hospital operator NMC Health PLC; and NMC sister company Finablr PLC, which owned the Travelex currency service.


Auditors’ fees are paid by companies being audited, an industry practice that, besides being widely seen as a conflict of interest, puts pressure on accounting firms to offer low-cost audits and limits the resources they can afford to devote to the task.

Large accounting firms in general have become increasingly reliant on other services such as consulting, tax and legal work, which require maintaining close relationships with client companies. EY is part of that industry trend. Its audit and related work provided almost half of revenue 10 years ago but now is down to 34%, roughly in the middle of the pack for the Big Four firms.

A spokeswoman for EY said auditing and related services remain the cornerstone of its business. Though it has diversified, “our commitment to audit has never wavered,” she said. EY has separate firms for each country, which follow the country’s audit rules and answer to its regulators.


String of Firms That Imploded Have Something in Common: Ernst & Young Audited Them
WSJ 16/10/2020

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