KPMG appointed as Auditor for Adler by the Court
A court has appointed KPMG as the auditor of the crisis company Adler. But the unpopular mandate cannot be legally enforced. The auditing company also reacted closed. The real estate company Adler Group, under pressure, is partially successful in its desperate search for an accountant. The Berlin-Charlottenburg Court has now appointed the audit firm KPMG as auditor of the German subsidiary Adler Real Estate. Parent company Adler Group announced late on Monday in a mandatory notice to the stock exchange.
Adler had to go to court because, despite his long searches and targeted methods, no examiner was willing to take the job. No wonder, because the state is considered a difficult issue. BaFin’s financial watchdog discovered several serious errors in balance sheets as part of its balance sheet control procedures. Bafin’s control procedure has not yet been completed.
In the past, the Luxembourgish firm, member of the large international network of KPMG auditors, was responsible for auditing the real estate company’s annual balance sheet. The latter resigned from the state claiming that Adler had not provided all the necessary information.
Not long ago, a private forensic audit commissioned by Adler himself failed to completely dispel investor doubts about balance sheets. This specific audit was not carried out by KPMG Luxembourg, but by the German company member of the KPMG network. KPMG Germany has now been appointed by the court as the auditor of the German subsidiary Adler Real Estate.
An Inconvenient Mandate for Auditors
With the court-appointed request, Adler expected the court-appointed auditor to audit the parent company of the Adler Group in Luxembourg. In addition, management announced concessions in cooperation with a court-appointed auditor and confirmed that it had done extensive preparatory work for the audit.
The audit firm KPMG Germany, now appointed by the court, is informed when questioned. A spokesperson said succinctly: “KPMG has not received a similar decision from the Charlottenburg district court.” This leaves unanswered the important question of how KPMG will decide when a decision will be formally made at some point.
Adler further points out that the audit mandate not only comes with a court order, but also requires KPMG’s acceptance. Adler also does not know whether KPMG will accept the audit mandate.
Even a court order cannot force the auditor to accept an audit engagement. The appointment of the court serves to appoint an auditor if the company concerned is unable to make such a decision on its own. However, this is not the problem in Adler’s case. Why Adler would like to hire an auditor, because without an audited balance sheet, finances are unstable.
What is lacking is the auditor’s willingness to take on the cumbersome task. After the turmoil of the last few months, this is understandable. Which also makes the search for an auditor more difficult: not least because of the company’s complex structure and problems, Adler also gave many consulting assignments to auditors. These service providers do not qualify as auditors because they are not permitted to audit and advise the same company at the same time.
Adler’s unsuccessful search for a chartered accountant was unprecedented in the history of the profession. There have always been difficult mandates like Adler with complex structures and obscure transactions, but an auditor has always been found. It may be due to the aftermath of the Wirecard scandal that validators are now very careful and reject potentially problematic requests just in case. The company’s scandalous bankruptcy not only showed how much damage could be done to auditors’ reputations. Auditors’ liability and therefore their financial risks under the law have also been increased.