Wirecard Says KPMG Could Not Review All Data for Audit
(Bloomberg) -- An independent audit into Wirecard AG concluded that it was unable to obtain the data needed to confirm past revenues, and criticized the payment processor for internal “shortcomings” and unwillingness by its third-party partners to contribute to the report.
As a result, KPMG couldn’t check on revenues of 1 billion euros ($1.1 billion) in transactions with third parties. Wirecard said the data needed to conclusively approve revenues from 2016 to 2018 is “primarily in the control of third parties,” but the company provided its own numbers to the auditor. Those didn’t reveal “any deviations between the reported revenues and account balances,” the German fintech said in a statement Tuesday.
Wirecard hired the accounting firm in October to look into its third-party partner business as well as its operations in India and Singapore following a series of reports by the Financial Times that accused the company of accounting fraud in several countries. Since then, the German fintech has drip-fed parts of the report to the market, including a statement last week that said KPMG had not made any substantial findings of questionable accounting methods in all four areas of the audit.
Shares dropped as much as 22%, the biggest intraday decline since February 2019. The stock fell 18% to 108.08 euros at 10:29 a.m. in Frankfurt.
The report was plagued by delays. The company failed to supply some of the documents KPMG requested in the course of the investigation, or didn’t supply them until several months after they had been requested, which delayed the investigation overall, according to the report. Wirecard also postponed individual agreed interview appointments several times, and failed to put an internal control system in place for key parts of its operations in Singapore, KPMG said.
Wirecard said complications from the Covid-19 pandemic were behind the late submissions, and the data needed to conclusively approve revenues from 2016 to 2018 is “primarily in the control of third parties.” It added that its 2019 accounts will not be released on April 30, due to the Covid-19 virus and the audit report.
Read more: Wirecard Says Audit Finds No ‘Substantial’ Accounting Questions
Any positive reaction to Wirecard not having to restate earnings will be muted because of the need for further detail on the review of the third-party business, analysts from Morgan Stanley said Tuesday.
Wirecard’s revenue soared in 2018 following an acquisition spree. The company’s technology helps its customers accept online payments and use its banking licenses to issue their own payment instruments.
The company had previously hired law firm Rajah & Tann to investigate its Singapore subsidiaries. A final report from the firm in March 2019 acknowledged accounting oversights and potential criminal liability among some Singapore staff, but didn’t find evidence that it was linked to Wirecard headquarters.
The Financial Times also reported that substantial sales and profits were processed by Wirecard’s Dubai-based partner company Al Alam Solutions in the names of several clients that didn’t exist or had no record of a relationship with the firm. The company “categorically rejects” the allegations, calling them “nonsense,” a spokeswoman said in October.
(Updates with details from the KPMG audit report from the first paragraph throughout, analyst comment)
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