One thing to start: Zoom etiquette classes, digital job shadowing and online scavenger hunts await the thousands of students who begin Wall Street’s first year of virtual internships this week. Goldman Sachs is even offering its interns cards with sartorial suggestions. Go deeper with the FT’s Laura Noonan here.

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Calls for accountability for auditors accelerate after Wirecard

When DD looked at Wirecard’s downfall a couple of weeks ago, we asked what many were thinking: how did the German payments processor’s auditors fail to see red flags that the FT investigations team had been pointing out for many months?

The answer provided by Wirecard’s auditors, EY, was that “third parties, with a deliberate aim to deceive” had provided it with false documentation. 

But as the FT later revealed, EY had failed for more than three years to request crucial account information from a Singapore bank where Wirecard claimed it had deposited cash. 

Its auditors had instead relied on documents and screenshots provided by a third-party trustee and Wirecard itself. 

EY has been fighting auditing fires on several fronts. The firm is facing a regulatory investigation into its oversight of NMC Health, a collapsed London-listed hospital group headquartered in Abu Dhabi as well as the saga surrounding the Dubai gold company Kaloti.

The auditing industry’s woes extend beyond EY. There has been a wave of accounting scandals that have swept through the corporate world, including UK outsourcing group Carillion, as well as alleged frauds at the mini-bond group London Capital & Finance and the café chain Patisserie Valerie.

Donald Brydon, the architect of proposed sweeping reforms to the UK audit profession, has renewed calls for urgent reform. “Given the focus on Wirecard, making it clear that auditors have an obligation to find fraud rather than stumble over it would be a smart move to change auditor behaviour,” he said last week. 

This isn’t the first time auditing firms have come under scrutiny. There was a push to break up the “Big Four” in the wake of Carillion’s collapse in 2018. 

Now the UK’s Big Four accounting firms have until 2024 to separate their audit practices, per the latest reporting by the FT’s Tabby Kinder. The firms must outline how they will implement it by the end of October, although they will have four years to put it into effect.

Bar chart of Revenue by source, financial year ending 2019 (£bn) showing Auditing accounts for a small share of the Big Four's turnover

The new principles from the Financial Reporting Council require that firms pay auditors in line with the profits of their audits, ringfence the finances of the audit division with a separate profit and loss account, and introduce an independent audit board to oversee the practice.

It goes to the heart of something very important in the industry — the inherent conflict of interest in its structure where auditors are paid by the very groups that hire them.

Buffett strikes his first pandemic deal

Warren Buffett has complained about how hard it is to find a good deal these days. The only place seemingly left for him is a slowly dying industry. 

On Sunday, he paid close to $10bn to buy Dominion Energy’s natural gas pipeline business as the utility made the choice to focus almost strictly on its power distribution business that will increasingly rely on clean-energy generation.

Dominion also made headlines for deciding to abandon a pipeline it was building with Duke Energy to transport natural gas from West Virginia to North Carolina after delays and legal challenges that had sent costs soaring to almost $8bn.

Pipelines are the kind of boring, annuity-like businesses that Buffett loves. And while the average energy company is obsessed with their image and what the likes of big institutional investors think about their carbon footprint, Buffett is happy to just stand there and take advantage of that reputational arbitrage. 

Fossil fuels are not the wave of the future. But for now, there is no shortage of demand just yet for cheap oil and natural gas. And with all the problems petroleum is creating for legacy producers, at the right price Warren Buffett is willing to be a solution. 

Go deeper with Lex

Uber finally gets a deal done in delivery

Uber wanted Grubhub. Postmates wanted a splashy public listing. On Monday, they settled for each other.

The $2.65bn all-stock acquisition will give Uber a larger slice of the hyper-competitive — and cash-burning — US food delivery market.

Line chart of market share in the US (%) showing battle over food delivery heats up

Postmates had slipped into fourth place behind Uber, DoorDash and Grubhub, which agreed to merge with Europe’s Just Eat Takeaway last month after courting an offer from Uber. 

The start-up appeared ready to kick off a public listing process at any moment, and it had previously brushed aside rumours of a sale. But Uber’s offer — representing a more than 10 per cent premium to Postmates’ last private valuation — proved too much to pass up.

While Postmates could be a step in the right direction for Uber’s plans to dominate the food delivery business, it’s unlikely to get it any closer to profitability, FT’s Lex notes

Job moves

  • Lloyds boss António Horta-Osório will step down from the UK bank at the end of June 2021 after more than a decade in charge. Robin Budenberg, chairman of Centerview Partners, will join the board of Lloyds in October and take over as chairman early next year. Budenberg will leave his role at Centerview but will remain as chairman of Crown Estate. He will replace Norman Blackwell, who has chaired the group since 2014. More here.

  • Commerzbank’s chairman Stefan Schmittmann will resign on August 3 and chief executive Martin Zielke has also offered to step aside as the German bank shuffles its leadership team to deal with the demands of Cerberus, its second-biggest shareholder. More here

  • Aviva has appointed Amanda Blanc as its chief executive, replacing Maurice Tulloch, who has stepped down after just over a year in the job. More here.

  • Barclays has hired John Muncey from Panmure Gordon and named him vice-chairman of its consumer and retail investment banking group for Europe. Barrett Frankel also recently joined the same time as a managing director in New York from JPMorgan Chase

  • Wm Morrison Supermarkets said non-executive director Belinda Richards was stepping down in September to join the board of Jupiter Fund Management. Jeremy Townsend, the outgoing chief financial officer of Rentokil, is joining the board with immediate effect.

  • Luckin Coffee founder and chairman Charles Zhengyao Lu has been ousted by shareholders at the scandal-hit Chinese coffee chain, just days after a proposal to unseat him failed to win board approval. More here.

  • Boeing communications chief Niel Golightly resigned last week over an article he wrote 33 years ago arguing women should not serve in combat. Reuters has more here

Smart reads

The rise of Ratcliffe Last week the privately held company run by Britain’s richest man, Jim Ratcliffe, struck a $5bn deal with BP and later unveiled designs for its debut car. The moves underscored the unsexy world of smokestacks and refineries on which the $60bn-turnover empire was built and its expansion into more glamorous areas. (FT)

Focus and optimism Our management columnist Andrew Hill looks at how companies are using the crisis to make tough decisions and reallocate capital, while UK corporates tell our colleague Dan Thomas about their new-found optimism after tapping equity markets. (FT, FT)

Legal fees The Guardian reports that London law firm Schillings earned $1.3m in fees for its public relations work with fugitive businessman Jho Low. The report is based off of US lobbying disclosures covering a period between January 2019 and March 2020. (The Guardian)

News round-up

Wirecard executive arrested in Munich on suspicion of fraud (FT)

Companies pause frantic fundraising to assess pandemic damage (FT) 

Apollo launches platform to make big loans (WSJ)

Cineworld to countersue Cineplex in spat over abandoned $2.1bn deal (FT)

China watchdog to purge bank sector of ‘illegal’ shareholders (FT)

Zomato cut off from Chinese funding by India-China tensions (FT)

Deutsche Bank job cuts slowed by coronavirus (FT)

Activist fund Elliott weighs stake in Café Rouge owner (FT)

Ambani’s Jio adds Intel backing with $253m stake sale (BBG)

Coronavirus prompts historic shift in Mitsubishi’s M&A strategy (FT)

UBI Banca rejects Intesa Sanpaolo’s €5bn takeover bid (FT)

UK to enter satellite race after winning bid for OneWeb (FT)

Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt and Mark Vandevelde in New York, Miles Kruppa in San Francisco and Don Weinland in Beijing. Please send feedback to

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