Wirecard is a once-successful company that is thriving in the banking and commerce industries. Since 2015, the organization began to receive allegations of deception, which was confirmed and led to closure in 2020. The company had two-tier corporate governance, which, with some advantages of achieving power and some control and differentiation, has the disadvantages of unnecessary bureaucracy (Storbeck, 2021). In addition, one of the foundations of corporate governance is transparency, which the company was deprived of, as complaints came even from its employees (Jo et al., 2021). The idea of such management did not work due to the dismissive attitude of the board, the absence of regular meetings in the interests of the company, and not in personal ones. As a result, there was a lack of effective oversight, which was supposed to be carried out by the Supervisory Board and an independent audit committee. In addition, the lack of proper authority to be audited by the state and the delayed intervention allowed the fraudulent scheme to proliferate so that Wirecard sought bankruptcy (Storbeck, 2021). There are several lessons to be learned from this case.
First, corporate governance always requires the presence of an independent and influential auditor’s opinion in order to maintain transparency. European countries need to improve auditing by the relevant authorities in order, above all, to protect lenders, investors, and employees from significant losses, as was the case with Wirecard (Jo et al., 2021). Second, investors should be more critical of unexpected risks that the company itself even mentions (Storbeck, 2021). The naivete of the investors was driven by the strong positions Wirecard was able to achieve in a relatively short time frame. However, lessons can be learned from this situation. Finally, in general, external auditors need to continually improve their controls to accommodate more and more fraudulent schemes. The Wirecard example, in this case, can serve as a starting point.
Reference List
Jo, H., et al. (2021) “Corporate Governance and Financial Fraud of Wirecard”, European Journal of Business and Management Research, 6(2), pp. 96-106.
Storbeck, O. (2021) “EY and Wirecard: anatomy of a flawed audit”, Financial Times.