“Even before Wirecard, the auditor industry was seething”

Headhunter Hellmuth Wolf, who specializes in auditors and tax consultants, talks about the upheavals in the secretive auditor scene. What does BDO have to do to cope with the large SAP mandate – and how attractive is EY for applicants?

Confidentiality is the key: auditors and tax consultants prefer to work in the background

Mr. Wolf, there is currently a lot of unrest in the otherwise dignified auditing industry.

That’s true. Most recently, the Wirecard case caused a stir – and criticism of the auditors. The Wirecard examiner EY even changed the boss in Germany and promised to improve the quality of the exam. But even before Wirecard, the auditor industry was seething. The EU Commission has tried to accelerate the rotation of mandates so that the auditors change more often and look at the companies’ figures with a fresher and more unbiased view. Above all, the audit firms of the “Next Ten” hoped to get audit assignments from large companies such as DAX companies. These “Next Ten” are the next smaller audit firms after the four big “Big Four”, ie PWC, KPMG, EY and Deloitte. But ironically, it is becoming apparent that the Wirecard case, at least in Germany, could trigger stronger changes than the EU regulations.

As the?

It can be observed that the clients, i.e. the companies, anticipate the consequences of more stringent rules. They know that soon after the Wirecard Act (FISG) comes into force, they will no longer be allowed to seek advice from their auditor – and will no longer be allowed to have their advisor checked. Many auditing and consulting firms offer both auditing and consulting services. It is noteworthy in this context that the software company SAP no longer wants to have its annual financial statements audited by one of the “Big Four”. For the financial years from 2023 onwards, BDO is to take over; KPMG is currently responsible. The question arises as to whether this will remain a singular event or whether a new trend will emerge that a Dax company will not be examined by a “Big Four” company, but by one of the “Next Ten”.

But after all, BDO is the next largest auditing company after the big four in the German market …

Yes, but the gap is considerable. In addition, the corporate culture of a medium-sized auditing company like BDO differs greatly from what is common in large auditing groups. But there was obviously no other way. Because SAP has awarded numerous consulting contracts to the big four, the company can no longer be checked by them.

A great success for BDO.

Yes. However, BDO must now increase its capacities and hire more staff in order to be able to cope with the SAP mandate in terms of personnel and expertise. SAP will take a lot of strength and resources from BDO. For some of BDO’s medium-sized clients, this could give rise to concerns that they will be neglected in the future.

Hellmuth Wolff is Managing Partner at the international personnel consultancy Signium Germany.  Wolff mainly advises auditing and tax consulting firms as well as law firms.
Hellmuth Wolff is Managing Partner at the international personnel consultancy Signium Germany. Wolff mainly advises auditing and tax consulting firms as well as law firms.: Image: Signium

That can be solved. BDO simply recruits the DAX audit teams from EY, for example, and the BDO partners responsible for medium-sized companies remain as contact persons for their clients.

I don’t think it will be that easy. At the moment you often hear that it is easy to poach entire teams at EY because the company is under so much pressure because of Wirecard. In fact, there are those willing to change. But EY still has very successful areas such as tax advice and legal advice. In addition, in large auditing companies such as EY, which audit and advise corporations, the partners and employees are sometimes highly specialized in individual industries or topics – such as the particularly complex regulatory audit of banks or insurance companies. This specialization makes the change difficult. In addition, large clients such as the DAX corporations choose their auditors and consultants primarily according to the brand.

Is that different in medium-sized companies?

Yes. In medium-sized auditing and consulting companies, personal contact between the consultant and his clients is what counts. In such an environment, the partner is available to the client as a permanent contact person and can easily switch to another company with this client connection. Incidentally, an important part of EY in Germany is also characterized by very medium-sized companies, not least due to the company’s historical roots in Baden-Württemberg. The medium-sized EY clients, however – at least according to my observation – do not see themselves affected by the Wirecard case and continue to rely on the cooperation with their EY partner.

Can you currently recommend auditors and consultants to switch to EY or should they first be careful and wait and see what consequences the Wirecard affair has on the company?

One cannot generally advise against. It depends on the candidate’s willingness to take risks and the area in which he or she would work at EY. When it comes to exams, the following applies: The further away the position to be filled is from Wirecard, the better from the candidate’s point of view. In the area of ​​consulting, it is easier as a personnel consultant to deal with objections from candidates, as EY still has very successful branches in this area, such as tax advice for mergers and acquisitions (M&A Tax). The successful units of EY will continue to exist