Embattled fintech company Wirecard refused to cooperate with investigating accountants KPMG as the accounting firm’s sleuths sought to sort verify whether allegations published in the Financial Times about the business’ financial affairs had any substance.
A report into KPMG’s special investigation, which was a forensic engagement that examined Wirecard’s operations in more detail than an annual audit done by company auditor EY, was released on April 27, 2020, and the accounting firm details the backroom machinations that were attempts by the company’s management to delay the review.
The firm was asked to drill down into the third-party acquiring business, merchant cash advances and the activities of Wirecard in both Singapore and India.
Tactics used by the company’s management, which is now the target of hard questions from regulators and lawyers about a US$2.1 billion amount that appears to have gone AWOL from bank accounts, included but were not limited to the failure to provide requested documents on time and the rescheduling of interviews with managers and staff involved in company administration.
KPMG was also unable to get access to documents held by Wirecard’s commercial partners, which hampered their ability to trace “transaction volumes during the investigation period 2016 to 2018”.
The firm told the board of supervisors, which hired KPMG to do a root and branch review of a range of operations, that the company was failing to deliver documents that the firm needed to complete aspects of the special investigation on a timely basis.
Wirecard’s media release that was issued on April 28 this year noted that KPMG has found some internal kinks, quirks and challenges with documentation and “organisational weaknesses”.
“Wirecard [remedied] these weaknesses since 2019 by establishing a Global Compliance Organisation and with the support of external consultants,” the company told stakeholders in a media release that touted news that KPMG did not find “incriminating evidence for the public allegations of balance sheet forgery”.
The company said that KPMG found no significant matters that would necessitate an adjustments to the financial statements covering 2016-2018.
A list of challenges faced by the investigators as they went about picking apart the company’s finances is outlined in the report. The various issues that made life difficult for KPMG to reach various conclusions are:
• Wirecard failed to supply some documents requested by the accounting firm during the investigation or documents were provided months after initial requests, delaying the process of investigating the company’s affairs;
• interview appointments had to be rescheduled on multiple occasions as the company postponed interview with internal staff;
• some of the investigative procedures brought to the attention of the board of supervisors in the early part of the investigation could not be carried out in part or in whole because there were no documents for examination nor was there the ability to access certain parts of the information system;
• electronic documents were provided to KPMG for the purposes of review and the firm noted in the report that the authenticity of the material could not be determined; and
• commercial partners of Wirecard refused to provide access to data for 2016 and 2017, which created a limitation of scope for the firm’s investigators.
The commercial partners or third party acquirers (TPA) are subjected to scathing criticism in KPMG’s report because data critical to determining whether allegations reported by the Financial Times were accurate could not be reviewed because TPA were unprepared to “participate in this special investigation in a comprehensive and transparent manner”.
“Transaction data and corresponding settlement evidence for the 2016-2018 investigation period, contracts between the TPA partners and the merchants as well as account statements and bank confirmations for trust accounts … could so far not be provided for the investigation for the purposes of the forensic investigation conducted by KPMG,” the report said.
“The evidence provided in this respect …. did not constitute sufficient evidence for our forensic investigation as they only consider the relationship with the TPA partner and not the entire transaction chain.”
The coronavirus also managed to get in the way of KPMG’s intrepid investigators trying to get to the bottom of a range of transactions with the firm pointing to the fact it could not get bank confirmations relied on by the auditors for TPA transactions.