IGTA Journal - Summer 2020

and in delivering better controls. But we cannot be certain. No one expects to be the “unlucky one” and to be caught out. You never want to bite the hands of those who feed you. But, we are all paying or will pay for those who were caught with the hands in the honey pot. Hall of shame Have you noticed that Wirecard has not even managed to make its first interest payment on its EUR 500m bond issue? The investors called them a “NCAA” (i.e. “ No Coupon At All ”) and the hall of shame of the capital markets. Nevertheless, it is important for people from the street to understand it has nothing to do with the pandemic. This is a fraud going on for a long time. It remains a rare phenomenon. WIrecard was rated by Moody’s at Baa3, lowest level of investment grade, before the collapse. It proves again that an opinion from a rating agency is not a verified fact. Wirecard story looks like Steinhoof in 2017 in the Republic of South Africa, which was convinced of “accounting irregularities”. What should we propose, therefore? Instead of criticizing, I would prefer to search for solutions to prevent such a disaster again. I keep thinking there are at least three recommendations to be made: (1). The turnover of external auditors should be increased. Why not every three years? (2). A double audit like in France could help reducing the risks, and finally (3). As for rating agencies, we can legitimately raise the question: “who audit the auditors?” We need to control them given their key role. I am sure we can find many other provisions and rules to guarantee better audits and stronger audit firms. In my opinion, the pricing of audit has been deteriorated over years and it may impact quality. Audit business should not be subsidized by other advisory or tax practices. The separation could help better pricing the audits to get more quality and stronger controls. There is no miracle recipe. However, we can certainly take measure to reinforce audits and prevent such accounting and fraud catastrophes. The Supervisors and watchdogs are also responsible in such cases of absence of due diligence. It is funny to notice that the Financial Times was the one that pushed them with their journalist investigations. I also consider that we must have more independent directors with competencies and expertise to do their job. The famous glorious German industrial and tech model has been severely hit last years and some conglomerates shrunk (e.g. Bayer, VW, Thyssen Group, Siemens, …). Auditors will claim that even most robust audit procedures may not uncover. It is fair to also say that deregulations and new digital business models are fertile grounds for scams. We do not know whether the audit firm will face similar issue as Arthur Andersen with ENRON. However, it will significantly impact its worldwide businesses at least. IGTA eJournal | Summer 2020 | 29