KPMG Expands Wirecard Accounting Exam


Wirecard revealed on Wednesday that a special KPMG audit would be broader than previously announced, examining accusations by short sellers regarding the German payments firm’s lending activities in Brazil and Turkey.

The details of the probe came in the form of Wirecard reported another quarter of the rapid growth in sales and profits that made it an investor favorite last year, catapulting the group into the prestigious Dax Index of German companies.

The company, which is also the subject of an ongoing criminal investigation in Singapore over its accounting at several subsidiaries in Asia and the Pacific, said last month it had hired KPMG to look into the questions about its accounting practices. which were raised by whistleblowers and reported by the Financial Times.

The FT reported suspicions that hundreds of millions of euros in sales and profits at Wirecard businesses in Dubai and Dublin were fraudulent, raising questions about the oversight provided by longtime Wirecard audit firm , EY.

On Wednesday, the company said KPMG would also look into accusations made by short sellers regarding a type of loan known as “Merchant Cash Advance.” Wirecard said last year it invested 400 million euros in providing short-term loans to its customers, many of whom are located in Turkey and Brazil.

Merchants using Wirecard to process credit card payments can wait up to a month to receive the money, so the product is designed to bridge this gap. However, an anonymous group of short sellers called MCA Mathematik has raised doubts as to whether the activity is proceeding as described by Wirecard.

In a letter to Wirecard’s supervisory board, MCA Mathematik said that “the two countries in which management has claimed MCA loans are the most important – Brazil and Turkey – cannot offer a meaningful program of this. type ”.

Documents filed by Wirecard’s Brazilian subsidiary with the country’s central bank do not describe significant MCA loans, according to MCA Mathematik. In Turkey, such cash advance loans to traders were not legal, the short sellers claimed, asking where the money for the loans went.

A spokeswoman for Wirecard said MCA Mathematik’s claims were “based on false assumptions which lead to false conclusions.”

Its MCA operations in Turkey have been “structured in full compliance with all applicable Turkish regulations and have been explicitly approved by the Turkish Banking Regulatory and Supervisory Authority,” the spokesperson said. Regarding Brazil, the company said that while the central bank’s statements were correct, the numbers were used and misinterpreted by MCA Mathematik, they added.

Wirecard, who flatly rejected the FT’s information, said lending to traders had fallen to around 320 million euros at the end of September, from around 400 million euros six months earlier.

KPMG had already started work on the special audit, which was due to be completed by March 2020, with the results to be made public, Wirecard said.

Alexander von Knoop, CFO of Wirecard, told analysts that “of course we have full confidence in our accounting and in the very intensive and detailed audit of EY”. KPMG’s review “will give additional confidence to our shareholders”.

Its latest results showed Wirecard expects to generate between € 1 billion and € 1.1 billion in earnings before interest, taxes, depreciation and amortization in 2020, which matches analysts’ expectations, according to S&P Global Market Intelligence.

For the third quarter, the Aschheim-based group recorded a 37% increase in revenue to 731.5 million euros from a year ago, and a 43% increase in ebitda to 211.1 million euros.

Wirecard said the Asia-Pacific region contributed half of its sales and profits in the first nine months of the year, up from around 40% in the same period in 2018. It previously said that its own investigation into financial irregularities in the region did not uncover any issues having a significant impact on its accounts.

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