For months questions have been swirling around the accounting practices at the high-flying fintech company wirecard AG. And investors have been whipsawed as the positive earnings reports have been countered by critical investigative reporting - especially from the Financial Times. So wirecard's CEO Markus Braun brought in KPMG to conduct a thorough audit and investigation to clear up the matter once and for all.
Earlier this week KPMG issued the eagerly-awaited report. Unfortunately, it did not not have the desired result. The 70-page report can be accessed here (pdf). KPMG's report is inconclusive, since many of the requested documents from wirecard's partners were not made available. Normally, revenue from partners would not be of great concern - if the accounting is transparent. But in the case of wirecard more than half its revenues and up to 90% of its profits came through partner organizations. KPMG was unable to confirm the validity of the numbers.
KPMG reported that some essential documents for its review arrived at the last minute, while many never arrived at all. Among the desired but absent information: original bank records detailing €1bn of payments.[...] In terms of the accounting, while KPMG found no evidence for manipulation, it cast doubts over several areas: how Wirecard calculated its cash reserves; how it booked the revenue generated by third-party business partners; about its know-your-customer procedures; its risk management; and about the willingness of staff to co-operate with KPMG.
So, in this key issue KPMG was unable to come to any conclusion:
"Hinsichtlich der Höhe und Existenz der Umsatzerlöse aus den TPA-Geschäftsbeziehun-gen zwischen der Cardsystems Middle East, der Wirecard UK & Ireland sowie der Wirecard Technologies und den jeweils relevanten TPA-Partnern kann KPMG als Ergebnis der durchgeführten forensisch geprägten Untersuchungshandlungen in Bezug auf den Untersuchungszeitraum 2016 bis 2018 weder eine Aussage treffen, dass die Umsatzer-löse existieren und der Höhe nach korrekt sind noch die Aussage treffen, dass die Um-satzerlöse nicht existent und in der Höhe nicht korrekt sind. Insoweit liegt ein Untersuchungshemmnis vor."
The senior management of wirecard tried to put a positive spin on the report:
"Wirecard selbst sehe sich durch den KPMG-Bericht hinsichtlich der Vorwürfe rund um mutmaßliche Bilanzfälschungen entlastet: In den vier Prüfbereichen des Berichts hätten sich für die Jahre 2016 bis 2018 nach wie vor keine substanziellen Feststellungen ergeben, die Korrekturen erforderlich gemacht hätten."
Investors, however, are not convinced that the report "vindicates" the company: wirecard shares have lost nearly half their value over the past two days.
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