Finance Minister Olaf Scholz. (picture alliance / dpa)
Germany's financial supervisory agencies are to be given greater powers to investigate complex balance sheet structures following the Wirecard scandal that broke in June this year, the cabinet decided in Berlin on Wednesday.
Legislation being prepared envisages greater powers for the Federal Financial Supervisory Authority (BaFin) and imposes stricter rules on auditors.
"The draft legislation is a decisive step in strengthening balance sheet checks, reforming auditing practice and acting more effectively to counter criminal manipulation," Finance Minister Olaf Scholz said.
The aim is to ensure that balance sheets and the certificates issued by auditors will provide a more accurate picture. "The rules will be considerably stiffened, and the supervisory authorities will have more bite," Scholz said.
The draft legislation still has to be passed by the Bundestag.
Wirecard went bankrupt after admitting in June that 1.9 billion euros (2.2 billion dollars) in assets were probably non-existent, causing its share price to nosedive and former executives to be arrested.
In the wake of the incident, questions have arisen as to why EY, Wirecard's auditor, had not noticed the financial irregularities.
Criticism has been directed at EY, along with APAS, a government financial investigative body, for their failings.
In addition, any private financial dealings by BaFin employees are to be restricted to avoid any suspicion of conflict of interest. Auditors are to be changed every 10 years, and their liability extended in the event of gross negligence.
Consultancy work for a company may in future not be combined with auditing the company's books.
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