US economy

Germany must toughen audit rules after Wirecard scandal – Weidmann

© Reuters. FILE PHOTO: Weekly cabinet meeting in Berlin

BERLIN (Reuters) – Germany must toughen its rules for auditing and accounting to prevent another billion-euro scam like the Wirecard (DE:) scandal, Bundesbank President Jens Weidmann said in a newspaper interview published on Monday.

Payment services company Wirecard filed for insolvency last month after admitting that 1.9 billion euros (1.7 billion pounds) supposedly held in trustee accounts by overseas partners probably did not exist.

“Wirecard is a scandal, and we have to do more to prevent it in the future,” Weidmann told Funke media group. German authorities must give rules and procedures more bite, especially when it comes to auditing and accounting, he added.

“For example, the audit process and the tasks, powers and liability of auditors should be reconsidered,” Weidmann said, adding that auditors should be able to better examine international business relationships.

Prosecutors last week arrested former Wirecard Chief Executive Markus Braun and two other former executives on suspicion of orchestrating a years-long criminal racket to inflate revenue and balances to hide losses dating back to 2015.

This enabled the company to borrow 3.2 billion euros by deception, prosecutors allege. That money is now almost certainly lost, making the collapse of Wirecard Germany’s biggest accounting scandal.

Finance Minister Olaf Scholz on Friday proposed to toughen financial oversight of companies, seeking to pre-empt an expected parliamentary backlash over the failure of regulators to spot the unprecedented fraud.

Scholz rushed out a reform agenda that would give financial watchdog BaFin greater investigative and enforcement powers, broaden its mandate to cover non-banking financial institutions and toughen penalties against lax auditors.

The Scholz plan was released ahead of a closed-door hearing of parliament’s finance committee on Wednesday.

Opposition lawmakers are expected to grill Scholz and Economy Minister Peter Altmaier over the German establishment’s failure for years to heed warnings from journalists and market sceptics that Wirecard was cooking the books.

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