they will go in with a spirit is very, very high. alexandra pop when she came back into the team, the captain. she's a massive different. she's course gold's. she does everything for the team. and i think germany will get this one done in a very, very close encounter, maybe an extra time mateus back of the deadliest whites. thank you so much. and that's our times to june for a dark film with a look at the big for accounting firms under scrutiny. i'm not really for me and the entire team here at our berlin newsroom. thank you so much for your company today with imagine how many portions of lunch are thrown out in the world. climate change very often stores. this is my plan, the way from just one week. how much work can really get we still have time to go. i'm going all with

what 5th, hulu. live being called the watchdogs of capitalism. the conscience of the free market and the pin stripe mafia. the big full audit is ernst and young tape e m. g, p, w, c, and duluth. the big 4 are incredibly influential in america because they are indispensable experts with an in depth knowledge of companies and tax law. they're much too powerful to make. they influence politics and legislation model, cuz that's when you come to work without the big for they have an important role

auditing, corporate financial statements. it's extremely important for us as consumers and for people who are in this, this to trust the information we are given. but are they doing their job in 2020 the why can't scandal shook germany from bows and from the stock market favorite to fraud company. so i never before, has there been such a climate in the docs and sing lung audited? why cause financial results? fee is without uncovering, the fraud is county signed as feler d for mistakes from 90 years ago, which led to our profession should not have repeated. see, you don't have to be an angel in order to make a good audit. you just have to be independent. each new scandal put the big order his in the spotlight. are they taking shortcuts? are they overwhelmed?

or is the system at fault? i ah, thomas haggard is replied. his passion is building guitars. with a pension of just under 2000 years, the former high school teacher says he is enough to live comfortably. but his also managed to put a little aside. and though, and i scared, i thought if you put money in a checking account, inflation takes it wouldn't. oh, instead he invested most of his savings in a promising german company, which did i did kind of musicals already damage. i'm not a risk taker. oh, which is why i didn't buy just any stock. even i bought why i got caught up in cost

of it had seemed a safe bet. but then the company suddenly crashed along with the chairs with a stop to computers. i printer afford so big that the stock would become almost worthless. i didn't think it was possible. is my terribly shy? why can't lost a total of 10000000000 euros in market capitalization? raising many questions. these though is how could he owe to the following that the payment processing company was fudging as well and seen the 0 younger finance minister blames the private auditors short. i climb under is a small investor like made con, check where the wire cod statements are true. austin managed thomas haggard, has joined a class action lawsuit against white cards,

auditor clift. they carry some blame. they should have been more careful missing. but who are thomas haggard? in the other small investors up against ernst and young o e y became the song auditor of y card in 2011. together with p w. c, k, p m g. and deloitte e. y is one of the big for the full largest accounting firms. together they employ $1100000.00 in and around $150.00 countries and they ordered the financial statements of almost all major companies. silas townhome is doing her ph. d at copenhagen business school. she's been researching the big 4 in the role they play in the economy and size for years. auditing is something that is required. this is something that is extremely

important for well functioning market economy every medium or large company is required to have its annual financial results reviewed by an independent auditor. for a market economy, it's extremely important for us as consumers and for people who are invest us to trust the information we are given. and our only weapon really is the audit ah. in 1929, the start of the great depression, companies and banks around the world rush to hide their financial problems. and countless people lost their jobs and savings, including hundreds of thousands in germany, one indies. and this was the context in which legislators introduced statutory audits for stock companies in 1931. he's off guard back in virtual twin about

harden globalization accelerated the economy. companies grew quickly informed, international networks. auditors grew to in the 1980s, 8 accounting firms dominated the international industry a expanded and merged forming the big 6 then it became the b 5. and just a short while later, the big 4 k p and g, a y, d light, and p w c. in germany, the institute of public auditors or i d. w, helps influence or the scene rules. the privately run organization represents the

interests of more than a 1000 public ordering firms in germany, including the big 4 ah, close by no means says the job, the auditor is clearly defined. ah, desk auditors are required by law to carefully verify annual financial statements spoof mm. they are also supposed to maintain professional skepticism toward the companies they audit, and follow a specific procedure ah, an actual perform east of us. an audit is designed to detect errors in financial statements of to the weather. due to fraud or not is irrelevant, would only be between students for camida when

a company opens its box, it's business is laid there in numbers, order to see where money flows in and where it then flows out. bank accounts, marketing costs, operating expenses and acquisitions. the big of the company, the more complicated this flow of money can be ordered is generally cannot examiner company in its entirety. they instead choose an area to focus on the one with a suspect, the highest risk they compare the company's statements with the actual financial transactions to get an understanding of each of the transactions. if the order to find no fault in the company's annual financial statements, they give what's called an unmodified opinion. a seal of approval for the comp.

the oldest is verdict, a wire card was trusted for many years. and to this day, e, why maintains it audited? why can't the best of its knowledge and according to protocol, when by social inter name initial for him posted if companies like that land and auditors don't notice it, because then we can no longer rely on the very foundation of lim. namely mister number is philosophy. fabio de monte coche? she had germany's why ca, parliamentary inquiry committee. together with parliamentarians from all political parties, demands, he began investigating the german companies collapse. not tobar 2020. the committee questioned a $110.00 witnesses of 9 months. when the key questions did e. why make mistakes?

the why can't, scandal was not the 1st time the big auditors had to face criticism. me . 5 years, horizontal boring machine company flow checks in places. it's results with fake sales. and k, p m g didn't notice then either leading to damages of more than 5000000000. toich marks the biggest white collar crime ever in germany. who's in the us energy company. enron inflated its profits for years. it's ordered to arthur andersen was one of the big 5 back thin. and once again, the order just failed to detect the fraud and wrong found for bankruptcy in 2001. and senior anderson employees destroyed company documents without permission following the scandal, the order to surrender the license to ordered listed companies. but it never recovered and was essentially dissolved in

2008. it was investment bank lehman brothers, filing for bankruptcy. lehman had used to counting tricks to hide its financial situation. yes. and he why kept a proving they cooked books ah, developments it's are in shock. the stocks are plummeting. lehman brothers eventually collapsed and a massive debt in 2008, triggered the largest financial and economic crisis since the 2nd world war taxpayer money was used to save banks around the world. 59000000000 euros in germany alone escaped diesel fy uncertain fiddler font. these are isolated cases of corporate fraud that auditors failed to detect at sophia, and each case is one to many than oust scenes. what can we say that is because of

these 10 scandals and 90 years? that's auditing truck, which checks thousands of financial statements every year. how it doesn't work was performed. we should auditors really help uncover corporate scandals and possible explanation is that there are conflicts of interest companies hire and pay their auditors themselves. a practice based on a government assumption that companies have an interest in being properly audited. then the vote trust is crucial. east div from auditing booths, the public trust in a company on its finances. in an on leesville trust fund intern named staton.

with honoring k is an expense on financial statements and a consultant. she says the fact that companies pay their auditors is problematic, or when he lies, the shopping to is still in the chin, the sign bud loosely agree on the deadline and i don't meet it. increasing costs then declined, might say, i see that you stay within it or next year will hire another auditor. he makes 99 proof on swan del 2 is all too familiar with this pressure. he worked as a junior auditor at p w. c in luxembourg for 2 years already during the course, the garage was basically of an auditor, see something feel it's against his interest to speak up, especially if they don't want to correct it deducted. it's impossible to audit well,

i'm only in abilene, i am. and as an additional factor complication the auditor company relationship next to auditing the big for also of consulting. they advise clients on digitalization, sustainability and taxes. the big 4 are incredibly influential in a market economy. they have a lot of services that really impact how business is done. silas styles home says this creates yet another conflict of interest. you cannot see someone as a your client and then also investigate them critically. as the regulator, you have to be on one side or the other. the big fall was called business use to be order thing. but now at any accounts for around

a 3rd of their revenue. around 2 thirds comes from consultancy. many centrally via if i know the auditing market is limited, and fees are essentially stagnant, and consultancy is the opposite. that then it makes sense to offer the latter using it not to 1st end date does and lies them and so beaten virtuously here at folk c. kept valley tate endeavor, trots with homeschooling traffic when he mixed in. not doing well financially. insurance quality at the auditing firm. i'm in the all. i'd like to add thought is doing well financially. also secures financial independence. not pinkies. i'm the only one who hasn't financially independent and it's probably most likely to look via the way him for a client. they're auditing when they shouldn't just be a neat tune. loiter

profit made from consulting, and she was, auditors can remain independent, at least according to class. peter norman. but is this theory true? it's our oldest as independent from their clients. it's another form of pdf. you see employee shared his experience in the us. now robot out worked as an auditor at p w. c for 18 years. the problem is that many companies that i experience the them 3rd of the comp or bouncing house to document the complexity of the transactions that they were doing. but the, instead of hiring 3rd party consultants to do that for them, the auditors was doing it for them. because again, once you do that, management likes to be auditory not supposed to do that because the auditors should audit if the other part ends up doing it. then who are the,

the auditors what have repeatedly reported his findings to his superiors. famous. i thought that was part of those things internally in my performance ratings started to get annually decline, and i was not allowed to work on jobs progressively. this is how our water says it recalled shows that his superior said bottle was too critical of his client's management. and to hire the thought that are more friendly or less inclined to give negative control opinions, which meant that if we alone, what are the one that we're giving adverse control opinion? when the other 3 did not, we will not have been high ever been the market. morrow bottle was 5 in 2017. his

suit for reinstatement was dismissed by california court in august 2021. ah, michelle destroys the certified public accountant and chairman of the association for medium sized company auditing. he says, the big for forcing small auditing firms out of the market. just one of the reasons why he's been campaigning for years, for strict a separation between odyssey and consulting her values and solstio opinions. china, you just can't trace what a fact consulting has on the independence of the auditors mission for, for the vacant emphasis of in proof. of post moore with following the financial crisis,

the topic was put on the easy, which ended in 2010 each. commissioner michelle banging, also felt the independence of auditors was at risk if you so is it healthy for the same firms to be auditing and consulting agency? docile context or is complete independence even possible in that context? i'm all bushy. domlyn schools are often and we hoped, what he said would become reality veterans criteria. vanya wanted to strictly separate auditing and consultancy. he also said, company should be required to change orders, his every 10 years is faulty, and of course, a lobby. what followed was a lobbying campaign which michelle bonnie, a correctly described as the biggest campaign ever in brussel tub san diego was the coordinator of the e committee on economic and monetary affairs until 2021. he saw lobbyists working

for large auditors exit political influence in brussels. the reading a 2015 in china striegel, they're talking to the decision makers and they're meeting them early on him and when it's crucial as of at the commission your at the ministries of the members state. why in the in hattie anything remained michelle daniels, ideas, member states themselves got to decide which e auditing reforms. they introduced me as a specific date get. everything was watered down. justin established fresh, lorden gemini, introduced several exceptions. auditors could still act as consultants to companies . they audit and they could order to company for longer than 10 years. how this reform developed reveals another potential conflict of interest.

new this we know the big for regularly getting lucrative consultants to contracts with german ministry since and offloading e y. and even after wire card or not, these consultancy contracts still exists will begin by a few problems. these problems show that the best people no longer work in the ministries ishmael, the best lawyer to hobble this problem also applies to the order to watchdog known as a pos in germany. a peer, yes. checks with the order is maintain their independence. as a half, it's employees used to work at one of the big for so if you have a system where there are 4 organisation that have penetrated the government

institution that are supposed to oversee them, they are essentially approachable. governments often have to rely on external experts in the big for a very happy to offer their expertise skipped stood in peak for when it comes to the big for there's a kind of conspiracy theory about house them. shady power influences everything by it's but that's just part of a desperate search to find a physical power not behind. global capitalism include knocked her in global is yet, and capitalism was i. but they are obviously exactly when she plays this misty doctoral. i was like a nomic power gives them political slate. ah,

for antoine dell, to getting a job or the big fall was a great opportunity. he started working for p. w. c in luxembourg in 2008. at that associate, i'm interested in numbers and i'm analytical that you thought this was a good fit. and for mid law, he believed auditors could positively impact society. some it's years, very important for auditors to be independent is, would kill us societies rely on financial data being corrected with the national sir. p w. c is demanding employer with long working hours and high pressure. by the time antoine del to a began to understand how luxembourg worked as a financial center in the demo system. so did offered memorial soup as good did the some audits really shocked me because i was investigating empty shell companies called no implies no revenue. her neural economic activity and luxembourg actually

taken and we're supposed to create transparency lifted up vomiting. but what's the point with empty shell? so they could either and if i could it, so that was a non to until to became disillusioned about the societal benefits of working as an auditor. p w. c. he lost his motivation. after 2 years, he resigned that before leaving, he came across confidential tax returns. i showed that luxemburg lloyd international companies with deals tailor made by p w. c. that slashed corporate taxes to less than one percent. that's english gets dam bys and every tax trick. just short of illegal is being used to move profit made in one countries. i'm into another country been to be taxed at a lower rate than in an unknown land. first, oil, dragonball done not foolish disturb last only to the ghost p

w. c. even prepared tax rollins with the letterhead of luxembourg tax authorities, government officials just had to sign and price waterhouse coopers. i o t w. c was practically a division of luxembourg financial administration. it's unreal, wendy, on tom del to a shared the documents with a french journalist and he was then charged by luck from the authorities in 2014 for leaking documents, bought in 2018, he was recognized as a whistle blower. he w. c. isn't the only firm selling such tech strategies they bring in a lot of money for k p m g, e y, deloitte,

and other tax consultants all over the world? yeah, of course. that is some extra spice through the discussion and the big for particularly when you think about how important they are for of functioning maggard economy. it's little bit worried that they are also it the ones who undermine the society in some ways, by showing if businesses how they can practice. it takes aggressiveness. according to the european commission, the e you lose is up to $70000000000.00 euros a year to, to corporate tax tricks, around half of the ease annual budget. their goal is to shop. biggest damage is that people feel like some people are above the law. in those who get expert advice, you have an international network and don't pay their taxes on this low as the entire systems legitimacy for the schism to sawyer, this team,

the common z in is z ashley, yellow, z 2 or to one vanderbilt, a smaller, vaster, difficult area to one is that morally objectionable to use tax laws put in place? but the legislator who's the sovereign lead skibo does this yet is were then zips gazette, st up. tax competition also causes tax avoidance. because images where does an incentive for some as a strategy for someone else and consultants are supposed to tell their clients about the various opportunities ministers out style barto would have a trust spoof anita if it's a tax consultant or auditor. hm. my, i don't do that is i got my clients can like their say, i caused them financial damage vide because i didn't tell them all the options isn't with all the legal options legality to reduce their taxes. it's, you want managed, wireless skipped, but the big for aren't just advising their clients.

what it's very problematic is that many are also involved in legislation and other things in ministries. so that's cable. i'm being retarded, and ministerial every country has its own tax laws, and the resulting complexity leads to a need for expertise exactly what the big for, and their international networks offer via zene by the but i to get one to niemen, var consulting allows us to see where the problems in the tech systems are one of these amino and retail politicians, the government, the finance ministries, to you on the parliament's parliament of maxim this coming saturday. oh, it's okay to speak with experts. he even business experts about. but when they're practically co writing laws, without the public or even parliamentarians knowing that's a problem with others. so somebody's in problem spring 2021

e. my oldest has come under scrutiny by the way, i can't parliamentary committee with a team of oranges was appointed a special investigate is the committee asked them to review a wise wire card audit. they findings was summarized in the when back report pulled out confidential. it was late to some journalists ah, felix halterman's works the handle, split a gym and financial paper, and had been following the wire card case for a long time. his desk also got a copy of the one back report to evaporate 60 gaster. the van back report is the 1st public audits of one of the big fours work. research with findings are crucial,

and i didn't say oh offish. but the investigators looked at records from 2016 until 2021, and tried to ascertain with an e. why should have uncovered the fraud early l mm. i cut of an in flight and 2016 wire card bought a dubious indian payments firm for a great deal of money trans, f suspicion rows that wire card managers. i made money off the deal in response in my start explain why they had overpaid for the takeover. bob, the one back report introduced lesson from march 29th, 2017. written by the e gwyle auditor. and address to the chairperson of why can't supervise report to todd. so sandy's appointed mr. abaski called sets and if these points are not conclusively clarified accident, yeah, there may be a modified opinion for the financial statements. we would also like to inform you

that we will decide whether we can continue to work together based on your reaction to this letter. e, y is threatening to not give an unmodified opinion and to withdraw from the auditing mandate targets would this would have been a disaster for wire card. a modified opinion alone is enough for investors and banks to lose trust. but it would have also been a bit like realty for the auditors. it never got out even the week after this letter. and we don't know what happened during that time. the why delivered at the opinion modified did e y receive the information they needed? the special investigators said the following in their report. the information includes verbal and written explanations by the management board. proper

clarification at the open points cannot be found in the documents when you should be done in what unsafe, i'm just having the board confirm things. then there's no point then i may as well skip it. i need to maintain a skeptical attitude and assume something is incorrect, mistimed. blue. this is the only time e y spotted top lives at wire caught in the supervisory board notes which handles black obtained the auditors said the following in 2019 to tarts. fife, under, into quote, doubts about the management's integrity. life at e. y doubts the boards, integrity, pretty much the strongest statements and auditor to make and goof about present can put in 2019. e y again gave wire card and unmodified opinion. but they did

refer to fraud investigations against wire card, employees and singapore, in their final report. e y said the following in a written statement. very few annual financial statements of tax companies have contained such statements. this alone shows that this was an unusual measure. ah, that the orders his comments received little attention, and why cod skilfully concealed its true value in the final report. as of them on the dividend. if you look at the balance sheet, you see 2700000000 euros in cash and cash equivalence. nothing about how this also includes money in escrow, wasn't good. that wasn't the common kind alliance alma to him. on the financial statement, it looked as if why a cart was swimming in money and sent young hut in iden through all the years. it

was auditing has armed ernst and young have failed to obtain an independent confirmation that these funds existed a definite instead, a y relied on trustees. latham in a written statement, e y said the complex criminal web was designed to deceive numerous stakeholders, including investors, bank regulators, supervisory boards, auditors, despite their diligent and extensive efforts. mm. e y had become suspicious, but it seems that none the less continued to trust why costs management board in key moments. vincent if i a y, relied on board statement so while simultaneously doubting its integrity by ford, even as an external observer level. but that makes you wonder how e y could have issued audit certificates all those years. wanted to this day, it's unclear why e y auditors did not heed. the many warning signals,

the damage to the reputation is considerable. clients such as commerce bank to which a telecom in k w, a government bank ended, they aud seeing agreements with e. y in 2020 munich state, prosecutors opened investigation into the partners at e. y audit at y caught june 2021. the parliamentary inquiry committee presented its final report on why i caught these up between this broad should have been stopped early on. ladies and gentlemen, bullying with young law coolish, the auditors should have verified whether the 1900000000 euros one 3rd of the balance sheet was actually in a philippines escrow account or bill. on some of my m control in the philippine

leaked e wise, high earning auditors failed in because according to the committee was not, and the auditors who failed to fire the case has exposed a radical failing by authority, especially by boffin might have buffing. boffin is germany's financial supervisory authority responsible for monitoring small banks, insurance companies, and securities trading ah, when in 2019 fresh fruit allegations against white card cost, a steep drop and share price barf in band investors from betting against the company without verifying whether they were problems with why a current balance sheet the financial regulator claim to tap was outside its responsibilities. ah, if i'm not responsible for something, it's not my fault. most. all of shelves was finance minister at the

time and the head of baffin. he held that position from 2018 to 2021 shalt told the parliament re committee. he didn't feel baffin had protected. why can't thought he conceded that state control to prevent and detect financial fraud, warring sufficient this up is a service dish to speak, and that's why it's so important for us to do everything by ensuring our powers and rules are strong to prevent a repeat and doesn't continue must my proceed. ah, the german act to strengthen financial market integrity or fisk was passed in june 2021. the law was supposed to help strength and confidence in the german financial market and place more comprehensive rules on auditors. with fiscal

germany implemented, the e auditing reform proposed by michelle pioneer in 2011. the obligation to separate the auditing and consulting for major companies was taken seriously or she is now no longer allowed to audit a publicly traded company for more than 10 years. and auditors also have more liability related to audits under civil law. listed stock companies must have affected internal controls. and baffin has more power and is directly responsible for monitoring balance sheets. ah descript, i need some parts of this law a useful but when it comes to auditing, it doesn't go far enough. i would have liked a stronger separation of auditing and consulting tunnel from performed. bottle

luncheon is skipped in fisk. i need to go to and the fizz cover has some good points the but it won't improve the quality of audits staggered. in the end, the fisk may lead to an even more concentrated, ordered market. more rules means more bureaucracy, which often goes beyond the capacities of smaller firms. sandy gold says the fisk doesn't address the actual problem. schultz at yet, and it shows introduced strict a public supervision by vin, the towers in the front. but if the thousands of auditors have conflicts of interest that i'm in cousins conflict like then just adding supervision on top is attacking from the wrong antagonist, thus, viet from pipeline in elf e club with his otens with early sign. let's be honest. non law can always prevent a wire card from happening and in fact, we way i can't definitive finan cook was an opportunist. she missed

thomas hag, it is disappointed. the law hasn't restored his trust venue . shaun's who is does money in my ear. and since they say pensions are safe as we move and that everyone should fend for themselves, done, the government and politicians have to make sure that order to keep an eye on things organ. does uber charge prove her? oh, will please, i'm always had fraud. and before it happens in full head, he in the top of all, she's kind what would need to happen to that to be guaranteed by would hitting i believe that in every country the, all the thing job should be done by the governments not by private companies. private corporations as always, the for profit as it goals,

and the conflicts that exist as far as independence, it will never be solved. fabio did mossey would like to see radical changes to the market system. the paulson, border team and consulting feet need to be strictly separated isn't actually quite so long. we need to break up the big plays and we need to require the inclusion of mid sized auditors from middle spanish and porcelain to him. when it comes to incorrect balance sheets, class, pete, and now mom says the company's a primarily responsible of the supervisory board has to ensure a compliance if the board isn't doing its job, authorities must intervenes and buff and needs more. right. and how much public involvement you would want in any solution and much, much market based involvement, you would want in any solution. that is a political question. why

a card shows once again that audits cannot office sufficient protection against financial fraud. markets need reliable monitoring, free of conflicts of interest to own or not to own. what about a sharing economy instead of a change in thinking is changing the economy to create something new the economics magazine, labor in germany. in 30 minutes on d. w. ah.

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