It has not yet been finally clarified what complicity the EY auditors have in the collapse of the bankrupt Wirecard group. While the regulator Apas meanwhile supposed to have found signsthat the examiners violated their professional duties, EY always rejected this and sees itself as a victim of Wirecard’s “fraud machine”. Whether that’s true or not will be seen at the end of the year when the Apas exam is completed.
One thing is certain: the Wirecard issue has shaken up the entire auditing industry. This may explain why the ailing real estate group Adler Group is now absolutely unable to find an auditor who wants to certify the figures for 2022 – a “fairly unique process for a larger German company”, as one banker says, and a sign that the next few months will be even more bumpy for the company.
Financial circles confirmed a report by Handelsblatt, after which Adler even sent a letter of request to the auditing companies asking them to apply for a mandate. “We are of course aware that this mandate is being discussed intensively and lively in the industry and in the individual auditing companies,” wrote Stefan Kirsten, Chairman of the Board of Directors, and Thilo Schmid, Head of the Audit Committee, in a three-page letter. Unfortunately, no auditing company applied for the mandates. The Adler supervisors now wanted to know why and promised to explain “why we believe it can be advantageous for your institution to audit the Adler Group’s financial statements”. The possible reasons for the reluctance are of course well known. “We also see potential reputational risks that can arise from an audit,” wrote the board of directors and also offered special conditions. One is prepared to “structurally reduce the reputation risks, for example by waiving the customary professional duty of confidentiality”. Increased communication between the auditor and the board of directors or the opening of all data from reporting periods before the end of 2022 is also conceivable.
For almost a year, the branched company has had to deal with serious allegations from the short seller Fraser Perring, who was also targeting Wirecard at the time. It’s about dubious real estate deals and bloated balance sheets at the expense of shareholders. The beneficiary, said Perring, is a network around the Austrian businessman Cevdet Caner, the damage would have shareholders and creditors. Adler and Caner have always denied this. But the financial regulator Bafin has also been examining the group’s financial statements for months – and had essentially confirmed one of Perring’s main allegations at the beginning of August: A real estate project in the Gerresheim district of Düsseldorf was included in the 2019 balance sheet with a value that was far too high, which Adler denies.
Adler is running out of time
The group wanted to refute the allegations with a special report by the auditors KPMG and also brought real estate expert Stefan Kirsten into the group as a new strong man. KPMG had also previously audited the annual financial statements. However, the verdict of the special report was disappointing, KPMG was unable to dispel the doubts, also with regard to the project in Gerresheim. In May, KPMG then announced that it would not be available as the auditor for the annual and consolidated financial statements for 2022 as planned. Since then, the supervisory board has been looking for new auditors.
If no one is found who accepts the order, a court will probably have to determine the examiner. Only: “It will also be difficult for a court to find anyone who has the capacity,” says the auditors. The industry is “sold out”. Many companies still looking for 2022 final exams would probably have to pay high prices. And anyone who is obviously a risky customer who is probably not of integrity has a problem. The mandatory customer acceptance processes of the auditing companies would then show that the order should not be accepted. “There is no help from a letter of request,” it says.
Adler is now running out of time. Without an audit opinion for the 2022 annual financial statements, which must then be available in March or April 2023, Adler cannot borrow fresh money on the capital market. But there are also problems with existing lenders: the Adler Group has promised investors in its bonds that it will submit “an annual report with audited consolidated financial statements” by April 30 of each year. This year, too, this was only just achieved and only without a certificate of completion. The company, which is listed in the SDax stock market index, wants to provide information on how things will continue this Monday after the stock exchange closes, when the half-year figures will also be published. On Wednesday, the Adler subsidiary Adler Real Estate is also inviting to the general meeting. Minority shareholders have already submitted a hundred questions. The company, they say, is facing “unprecedented difficulties.”