It is interesting to see the developments in the case of German Fintech Co Wirecard which until a few days back was a model poster company. On 1st June its market cap was € 15 bn and now the company is in liquidation. Just imagine investors losing such a huge value almost overnight. At the heart of the matter is an accounting scam. €1.9 bn of the cash sitting on its balance sheet is apparently non-existent, reminiscent of the Satyam scandal which happened in India. What is interesting to note is that within days of discovery of the scandal, the CEO was arrested, granted bail, company liquidated, investigations are on in Germany and Philippines (where cash was allegedly held), the EU has questioned the role and the efficacy of the German regulator, Germany is terminating the contract with the accounting regulator and appointing a new one….all of which may have taken fairly long in our Indian system. Scandals happen everywhere, including in the most evolved and sophisticated markets; what sets those markets apart is the speed of action by the authorities and the way in which the regulators question themselves and bring about changes to the system of governance. Clearly, a lot more will emerge in the days to come and we will see a lot of reforms that will impact the accounting profession. A space to watch out for.
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