WireCard had a rocky journey on its way to the top. Founded in 1999, the company was nearly wiped out during the dot com bubble. In 2002, Markus Braum joined as CEO, saving the company through consolidation and a pivot towards processing gambling and pornography payments. The business came into the public eye through a reverse IPO with InfoGenie, however, real success came in 2008, springboarded by its two new products: A pre-paid card for online payments and (… somewhat ironically) a fraud prevention suite using online & AI learning. A decade later, Wirecard claimed over 250,000 business collaborations, boasting €2.1bn in revenue and had ascended to the DAX, an index of Germany’s 30 largest companies.

Unfortunately despite Wirecard undoubtedly prevented many cases of fraud over the last 20 years, they failed to address a pretty important one - €1.9 bn that auditors could ‘probably’ not prove its existence. Whilst the Financial Times brought a spotlight to this back in 2019, it was not until this month where E&Y claimed responsibility for discovering the fraud, despite signing off Wirecard’s accounts for more than a decade prior. This week an internal spreadsheet uncovered some of the breadth of the fraud – it turns out a mere 100 clients accounted for over 50% of their revenue and that over 45% of customers spent less than a single euro.

Whilst it seems unlikely that the scandal will bring down E&Y it does beg a question surrounding the lengths business will go through to inflate their value and the role of auditors. This is not the first time E&Y has been caught in such a scandal – in 2016 the Japanese affiliate was fined £11.6mn for negligence of due care, over a similar ordeal, by failing to identify irregular profits and transactions in Toshiba. In both cases, a routine audit procedure would have saved years – and investors billions. With a renewed focus on accounting practices in the world of start ups, the question is one that has been asked for two millennia: ‘Quis custodiet ipsos custodes?’ - Who will watch the watchmen?

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