Dan McCrum of the Financial Times has been named the British Journalism “Journalist of the Year 2020”, due to a Wirecard Investigation.
Mr. McRum is a skilled Journalist and Financial Analyst who exposed Wirecard’s huge accounting fraud when regulators, financial market professionals, and auditors turned a blind eye, regardless of the smoking gun there. He was prudent and diligent for a few years when for example more than 2000 German CFA charterholders haven’t exposed or even noticed financial shenanigans.
Wirecard’s story
Founded in 1999 as a Fintech middleman between online webshops and the banks or credit card companies, it has grown into a “Unicorn”. The Company became a member of the DAX Index (30 German largest publicly traded companies) and had once reached a market cap of more than 20 Billion Eur.
Before exposed, Wirecard was receiving clean audit reports by one of the BiG4 firms for more than a decade. After postponing its auditing report for FY 2019. the auditing company ultimately issued it and announced that they couldn’t find proof of the existence of 1,9 Billion Eur in the cash balance.
Another Big Four Company was specially hired in 2019. after the publication of internal documents and whistleblowing information in FT. When the auditing was completed, a new auditor issued a report in April 2020. in which they couldn’t confirm the existence of 1 Billion Eur in Wirecard’s revenues from third parties, which were booked from 2016. to 2018.
Dan McCrum exposed the biggest Fraudtech ever. However, he faced down intimidation, illegal surveillance, and personal threats as a part of Wirecard’s management campaign of protecting their misconduct and fraudulent business model.
Instead of immediate scrutiny over Wirecard, the German regulator also filed a criminal complaint against FT Journalists who were writing about shenanigans and whistleblowers.
The case resulted in an insolvency procedure, billions of Eur in investors losses, and of course lost public trust in regulators and auditors. Auditing company Partners are also facing an investigation by German prosecutors. One Wirecard’s C-level executive was arrested and another is still a wanted fugitive.
Wirecard’s model involved engaging suspicious partners that have done significant business with them. From the booking of multi-million Eur in commissions from a shell company registered in the Philippines fisherman’s house to the round-trip transaction schemes and revenues that lacked the paperwork and were of course uncollectible.
Conclusion: Companies should not pump up their top line through corruption or fraudulent revenue recognition schemes, and they also should not pump up their bottom line by expense misstatements. Sooner or later, it will be exposed and resolved.
The eventual fraudulent business model will eventually become Ethical and Compliant or it will cease its operations.
Due to well-known bankruptcy procedures and recessions caused by corporate financial frauds, it is clear that internal control systems themselves and compliance functions, as well as internal and external auditing, have shown that they are not sufficient to prevent financial shenanigans and fraudulent financial reporting.
That is one more reason why Forensic Accounting becomes an increasingly relevant discipline characterized by interdisciplinary features. Forensic accountants need to understand more than numbers themselves. The function requires wide knowledge and skills from a variety of disciplines for understanding the broader context of various economic trends and events.
Forensic accountants, among other things, use knowledge and skills from financial accounting, auditing, managerial accounting, statistics, criminal law, criminology, and psychology, and they are not part of the internal corporate functions and departments, external auditors, or in any sort of conflict of interests.