EY’s German arm is planning to cut 40 partners and 380 staff as it attempts to boost profitability in the wake of the Wirecard scandal.
The Big Four accounting firm’s German business is in talks to ditch hundreds of jobs after top audit clients including Commerzbank, DWS, and KfW pulled away from the firm following discovery of the fraud, EY confirmed today following reports in the Financial Times.
The Wirecard fraud saw shares in the Munich fintech collapse in 2020 after the firm filed for bankruptcy on discovering €1.9bn (£1.7bn) had gone “missing”.
First established in 1999, Wirecard started to come under scrutiny in 2015, following a Financial Times investigation into the payments processor’s business practices.
As Wirecard’s auditor for more than a decade, EY has also faced scrutiny over its failure to spot red flags in the fintech firm’s accounts before it collapsed in 2020.
Most of the 40 partners to be cut are from the EY Germany’s audit practice. The majority of the 380 staff to lose their jobs will be in back-office positions in business development, finance, legal, human resources and marketing roles.
An EY spokesperson confirmed the reports in stating: “The Management Board of EY Germany has decided on various structural changes subject to co-determination”.
German law gives workers the right to participate in management decisions under the ‘Mitbestimmung’ (co-determination) principle.
The country’s Mitbestimmung laws require that large companies allocated 33-40 per cent of seats on their boards to worker-elected representatives.
The EY spokesperson said “the planned adjustments should preferably take place in form of voluntary solutions under a mutual understanding,” as they noted “EY Germany has initiated discussions with the co-determination body.”
The spokesperson added that “the planned measures are intended to put EY Germany in the strongest possible position for future success.”
EY is currently facing a series of lawsuits over its alleged involvement in the Wirecard scandal, including from German lender Commerzbank which filed a €200m lawsuit against the auditor last week.
The Big Four accounting firm is also facing a class-action lawsuit on behalf of Wirecard’s investors over claims it breached its duties by “aiding and abetting” the fintech in filing “false annual reports”.
The cuts come as EY pushes forwards with plans for a global split as it seeks to free itself from the conflicts-of-interest rules that block it from selling advice to audit clients.