Impact of the Wirecard scandal on EY's perceived audit quality

The Wirecard scandal is arguably the most significant accounting fraud in post-war German history. For years, the financial service provider has fraudulently misstated its financial reports, and the statutory auditor EY did not detect the fraud. Such scandals obliterate trust in the annual audit, and may affect financial statements users' audit quality perceptions. The present empirical study investigates the effects of the Wirecard scandal on shareholders' perceived audit quality of EY, measuring the cost of equity of 170 CDAX-listed companies from 2016 to 2020. The results indicate that EY's perceived audit quality after the scandal is significantly lower than in earlier periods or for clients of other auditors.