It is likely to be a unique event for a larger company in Germany: the auditors from KPMG refuse to certify the figures of the important German subsidiary of the reeling real estate group Adler – even though a court in Berlin has suggested it. The parent company is based in Luxembourg, the German judges could not decide for them, but they could for the daughter. After “detailed assessment” and “taking into account all the circumstances”, the conclusion was reached not to accept this test, KPMG said without giving any further reasons. Adler did not comment on this.
The auditors from KPMG had already refused the Adler Group the attestation for the 2021 annual financial statements – with reference to a lack of information. KPMG also did not want to accept the mandate for 2022. All other major accountants had also waved their hands. After months of unsuccessful searches, Adler finally applied to the district court of Berlin-Charlottenburg for a court order, hoping that KPMG would then also take care of the parent company in Luxembourg. That didn’t happen, and now Adler is running out of time: the annual financial statements must be audited by December 2023, otherwise banks could call in their multi-billion dollar loans. Adler has bonds worth 3.2 billion euros on the market, including convertible bonds and bank loans, the group even owes 6.9 billion euros.
For more than a year, the nested company has had to deal with allegations by short seller Fraser Perring. The British investor is betting on falling share prices and at the time also had his sights set on Wirecard, which later went bankrupt. It’s about dubious real estate deals and bloated balance sheets at the expense of Adler shareholders. The Bafin has also been examining the group’s financial statements for a long time, and last summer the financial supervisory authority confirmed one of Perring’s main allegations: a real estate project was included in the 2019 balance sheet with an excessively high valuation, which Adler denies.
Do examiners have to accept a mandate?
The examiners should also see their distrust confirmed. In addition, the Wirecard issue has shaken up the entire auditing industry. Actually, there is a legal obligation for companies to have their business figures certified by an auditor. But what to do if no one can be found? And don’t the financiers – i.e. banks and shareholders – of the company have a certain right to an auditor taking pity on them? After all, companies willing to pay could be driven into bankruptcy simply by not being able to find an auditor. the experts discussed now about whether an auditor can possibly be obliged to accept an audit engagement for a company. Lawyers and notaries are also familiar with such mandatory mandates.
Accountants circles, on the other hand, said that auditors, in contrast to tax investigators or public prosecutors, depend on the cooperation of the audited company. Therefore, without a complete revolution in the system, there can be no mandatory mandate. The financing banks could also refrain from submitting verified figures. In addition, Adler is responsible for the situation itself: If there was a real willingness to clean up and cooperate, an examiner would certainly be found. But that is not the case.
After all, Adler has now succeeded in extending its billion-dollar bonds, as the group also announced on Thursday. The first attempt at restructuring the bonds failed shortly before Christmas after not enough creditors had approved a series of bonds. This means that Adler would now be “financed through” by mid-2025.