Accounting Scandals in Germany

This chapter describes important accounting scandals in Germany with respect to their motives, structure of accounting transactions, with related balance sheet and profit and loss items, and the reactions of concerned parties. Four high‐profile cases of accounting scandals—Co op, Balsam, BVV, and Philipp Holzmann—are analysed in detail. It is revealed that control failure of the supervisory board and the auditors was found as the main reason for German accounting scandals. The legislative authorities have tried consequently to strengthen the responsibilities of the supervisory board and the auditor. In the cases of Co op, Balsam, ComRoad and Flowtex, dominant insiders tried to expropriate outside investors. These examples are typical for an insider‐oriented financial system. The public debate following the real and alleged accounting scandals has resulted in regulatory consequences. Major legal accounting and auditing changes have been introduced in the past two decades which are motivated by the desire to prevent future accounting scandals.