Berlin On June 19, 2020, an unusual
Annual General Meeting of Deutsche Telekom took place. The originally scheduled
shareholders' meeting had been postponed due to the corona virus. The decision
was therefore made for the virtual variant. So far, so innovative.
One of the items on the agenda could become politically sensitive. Under Item 8,
the Telekom Supervisory Board proposed an auditor to the Annual General Meeting
in the event that an auditor's review of additional interim financial reports
for the first quarter of 2021 would become necessary. The recommended accounting
firm for this task: Ernst & Young (EY).
That would not be an unusual process if the federal government were not the
major shareholders of Telekom and EY were not at the center of one of the
biggest investor scandals in the history of the Federal Republic.
This Wednesday, the members of the Finance Committee will meet for a special
meeting to clarify the billions in air bookings made by the insolvent payment
service provider Wirecard. The auditing company EY did not notice any of the
inconsistencies for years.
That is why the
deputies of Finance Minister Olaf Scholz (SPD) and Economics Minister Peter
Altmaier (CDU) want to know, among other things, what consequences the federal
government intends to draw from the allegations against EY. So far none are
When the Handelsblatt asked
about the federal government's voting behavior at Telekom, there was no answer.
The question of how State Secretary for Finance Rolf Bösinger had behaved as a
representative of the federal government on the Supervisory Board was also kept
Like the other two finance state secretaries Wolfgang Schmidt and Jörg Kukies,
Bösinger is a close confidante of Federal Finance Minister Scholz. Most
recently, he was State Councilor at the economic authority in Hamburg. The first
mayor at that time was Scholz.
In government circles one wonders why Bösinger was not sensitized to EY. The
Federal Minister of Finance went public a few days after the Telekom general
"The Wirecard case is extremely
worrying," said Scholz on June 23. In his opinion, critical questions also arise
in the supervision of the company, especially with regard to accounting and
auditing. “Auditors and supervisory authorities seem to have been ineffective
here,” said Scholz.
Last week Scholz became even more specific. "The question arises as to how it
can be that highly qualified, excellently trained and dearly paid auditors from
a company that has audited Wirecard's financial statements for almost ten years
have not noticed any of the now apparent frauds." now he gave no name. But
everyone knew that EY was meant because the company checked Wirecard.
State Secretary for Finance Bösinger is also a member of the Audit Committee of
the Telekom Supervisory Board. The Audit Committee recommended both EY and the
Deloitte auditors to the Supervisory Board for the audit mandate advertised and
informed them of a justified preference for EY.
In government circles it is pointed out that EY was recommended before the
allegations in the context of the Wirecard scandal later became known. The
preference for a switch to EY had already become apparent at Telekom in the
spring, it is emphasized, even if the formal proposal was only made at the
general meeting. The selection of an auditor is preceded by a lengthy selection
process. The general meeting officially decides.
However, the federal representatives on the Telekom supervisory board could put
another change of auditor on the agenda. It is not known whether this is
planned. The Federal Ministry of Finance is keeping a low profile.
Serious allegations against EY
The federal government is also a major shareholder in Deutsche Post AG. The
audit mandate is currently advertised. Whether the Wirecard scandal will be
taken into account in the mandate has not yet been determined. The Federal
Ministry of Finance did not want to provide any information. The other EY
mandates at Commerzbank and Lufthansa, in which the federal government has a
say, have been inherited by Scholz. There are currently no government officials
on the relevant supervisory boards.
As a consequence of the supervisory failure, Scholz and many others in politics
are calling for, among other things, a stronger rotation of the audit firms. The
existing rotation rules have meant that EY was able to win the Telekom mandate,
among other things. Before that, competitor PwC had examined the group for
EY were made serious allegations during the examination of Wirecard. The
opposition therefore calls on the Federal Minister of Finance to act. "Olaf
Scholz is well advised to critically question EY's auditing mandates at
state-owned companies," FDP parliamentary deputy Michael Theurer told
Handelsblatt. If it turns out that EY has checked Wirecard more than sloppily,
the federal government must act as a role model and let its mandates expire,
The Greens are also
calling for consequences. "At EY there are unpleasant questions," said Green
finance expert Danyal Bayaz the Handelsblatt. The federal government must
explain what conclusions it draws from the Wirecard case. "The question
naturally arises as to whether there must also be consequences for companies
with federal investments in the selection and rotation of auditors."
Dealing with EY also has a political dimension. So far, the Wirecard scandal has
primarily put Finance Minister Scholz under pressure. After all, the Ministry of
Finance is responsible for the financial supervision of Bafin. In SPD circles,
however, it has repeatedly been pointed out that there are also critical
questions for EY.
The Federal Ministry of Economics is responsible for the supervision of the
auditors. In this respect, it is not surprising that the SPD prefers to focus on
the auditors and thus aims at Altmaier, while the Union primarily addresses the
failures of financial supervision and focuses on Scholz.
Because of the Wirecard scandal, the finance minister has presented an action
plan that provides for a strengthening of the Bafin, but also stricter
monitoring of the auditors. The state auditor oversight office at the Federal
Office of Economics and Export Control should get “more bite”, also with its
sanction options, it is said.
The independence of the auditors should be strengthened by providing for a
mandatory external auditor rotation after ten years for all companies of public
interest. It also says that the separation between auditing and advice at these
companies should be tightened.
However, parts of Scholz's project are meeting with resistance from the Union.
At the meeting of the finance committee this Wednesday, the opposition therefore
also wants to hear from Altmaier whether he supports the plans for more
stringent regulation of auditors.
More: The fraud at Wirecard is said to have started 15 years ago- see