The story is more interesting, especially in the case of Wirecard. The FT started questioning Wirecard's accounts years ago, and Wirecard and the German financ

The story is more interesting, especially in the case of Wirecard. The FT started questioning Wirecard's accounts years ago, and Wirecard and the German financial services regulator, BaFin responded by... launching legal attacks on the FT, accusing the paper of colluding with short sellers. The FT kept finding and printing more and more evidence, EY kept giving Wirecard audit cover, and BaFin kept up an aggressive defence... of Wirecard. Then finally €1.9bn was found to be missing. The various "evidence" provided to EY to "prove" the money was real shouldn't have fooled anyone who had even the most basic grasp of professional auditing. When the shares were in freefall, BaFin finally admitted that perhaps there was a problem. Then EY's CEO sent a letter to clients in which he said “Many people believe that the fraud at Wirecard should have been detected earlier and we fully understand that. Even though we were successful in uncovering the fraud, we regret that it was not uncovered sooner.” The part in italics is simply a lie. EY did not uncover the fraud. The FT did. And in fact what finally killed Wirecard was an independent audit by another Big 4 member - KPMG - which was supposed to vindicate Wirecard, but actually found "irregularities" which Wirecard couldn't explain. So - what to conclude? It's hard to avoid a cynical interpretation - that auditing at this level is basically PR with spreadsheets, intended to reassure investors that everything is fine, and not a serious effort to reveal financial irregularities. It's not just EY. KPMG, Deloitte, and PWC have all had issues of their own. The underlying problem is that these companies are hired by their clients to provide a clean bill of health, and if they're too thorough they're not hired again. So the incentives are - let's say - heavily aligned against too much stringency. The FT Wirecard story is well worth a read. The FT is (expensively) paywalled, but some of the reporting is free. https://www.ft.com/content/284fb1ad-ddc0-45df-a075-0709b36868db https://www.ft.com/content/284fb1ad-ddc0-45df-a075-0709b3686...