What lessons will the EU learn from the Wirecard scandal?

Question

Accepted Answer

The EU Will Strengthen Company Reporting and Audit Rules Following the Wirecard Scandal

The European Union intends to enhance regulations governing company financial reporting and the auditing profession, drawing critical lessons from the Wirecard scandal. This initiative aims to address systemic weaknesses identified in financial oversight and reporting practices. The proposed reforms, expected to be detailed by the end of 2022, will follow a public consultation period to gather input on various aspects of corporate governance and auditing.
Enhanced Scrutiny of Audit Committees and Board Responsibilities

A key focus of the upcoming public consultation will be the role and effectiveness of company audit committees. The EU seeks to clarify whether these committees' responsibilities are adequately defined and to explore making them mandatory. Furthermore, the consultation will examine the clarity of responsibilities assigned to company board members concerning the accuracy of financial reports. This review is prompted by the understanding that clear lines of accountability are crucial for reliable financial disclosures.
Addressing Deficiencies in Auditor Oversight and Quality Control

Supervisory bodies overseeing auditors across the European Union have pinpointed several recurring issues. These include weaknesses in internal quality control systems, inadequate monitoring of entities deemed high-risk, and insufficient audit evidence and documentation. These findings underscore the need for more robust auditing standards and enforcement mechanisms to ensure the integrity of financial statements. The proposed regulatory changes will aim to directly tackle these identified shortcomings.
Promoting Competition and Quality in the Audit Market

The European Union is also considering measures to foster greater competition within the audit market, which is currently dominated by the "Big Four" firms (EY, KPMG, Deloitte, and PwC), who hold a 92% market share. Concerns have been raised that a strong emphasis on more lucrative non-audit services may detract from the quality of core auditing functions. Therefore, stronger actions may be necessary to ensure a more balanced and competitive landscape, potentially leading to improved audit quality.
Strengthening Regulatory Cooperation and Enforcement

The Wirecard scandal also highlighted the need for improved cooperation between national and EU-level audit regulators. The European Securities and Markets Authority (ESMA) previously criticised Germany's regulator, BaFin, for its handling of the Wirecard case. To prevent future failures, the EU plans to enhance coordination among supervisory bodies and strengthen enforcement capabilities to ensure compliance with financial reporting and auditing standards.

Reading history

Hide →

This history is cleared when the page is closed.

What lessons will the EU learn from the Wirecard scandal?

Loading

Was this article helpful?

Helpful

Not helpful

Report an issue

1

0

0

Share with friends