Regarding M&A activity, the allegations of Wirecard are accurate and are not limited to financial reporting and TPA business. First, the claims of carrying out a fraudulent company are pretty disturbing; it hurts the industry’s growth. In M&A activity, consolidation with other entities is always prioritized, as this will help stabilize the activities of a company. Wirecard Company also had the same ideology but collaborated with other serious brand types, always enabling them to be recognized.
The financial reporting for Wirecard Company was all along well evaluated until the year 2019, when the most crucial things would not be accounted for. It implies that at some point, there reached an issue whereby the management of the Wirecard Company took the stuff of the company to be personal just to enrich themselves.
Equally, it is the reason why; the 1.9 billion euros could not be accounted for. Wirecard Company had third-party administrators who used to insure them concerning TPA business. The ownership of their licenses always paved a smooth way to carry out their business smoothly and effectively.
What information in Wirecard’s financial statements could you have used to assess the merit of these allegations, and what additional information do you wish you had had? Because of the financial times in Wirecard Company, I could use the financial statement for the year 2018 and the past three years, which will include 2015, 2016, and 2017 to determine the allegations.
The financial statements of the past three years will decide whether or not it was true to the claims made of fraud business by Wirecard Company. In addition, it will open the ways to know the profits made between these years, thus learning the company’s worthiness. Knowing the company’s worthiness would differentiate the billions of euros that were said to have been deposited in the different bank accounts.
Concerning additional information, I would wish to have internal auditors of the Wirecard Company to help assess the company’s financial status. It is always good to have internal auditors to ensure that when an external auditor makes his inspections of the company’s financial position, everything is well taken care of. Equally, this makes it very easy to make decisions favorable to its growth and even get well-wishers to support the company even on its deathbed.
Beneish’s M-Score is a mathematical model that uses eight financial ratios weighted by coefficients to determine whether a company’s earnings have been altered. Professor Messod Beneish developed it after publishing the Detection of Earnings Manipulation in June 1999.
If corporations have significant sales growth, worsening gross margins, rising operating expenses, and rising leverage, Beneish believes they are incentivized to manipulate earnings. They’ll most likely control profits by speeding up sales recognition, boosting cost deferrals, increasing accruals, and lowering depreciation.
Beneish M-Score = -4.84 + 0.92DSRI + 0.528GMI + 0.404AQI + 0.892SGI + 0.115DEPI – 0.172SGAI + 4.679TATA – 0.327LVGI
Beneish concluded that if a company scored greater than -2.22 (a less negative or positive number), profit manipulation was likely. Concerning the allegations made to Wirecard Company and by using the Beneish formula, it was confirmed that the company was never making any other profits due to the 1.9 billion euros, which were never accounted for by the company.