Germany's audit watchdog on Monday slapped heavy sanctions on accounting firm EY, which has come under scrutiny for failing to spot large-scale fraud at collapsed payments firm Wirecard.

The German branch of EY is banned for two years from taking on new auditing assignments for entities "of public interest", including listed companies, watchdog APAS said in a statement.

It also handed EY, one of the world's Big Four accountancy giants, a €500,000 fine.

EY said in a statement it had "cooperated fully" with APAS throughout the investigation and "regrets that the collusive fraud at Wirecard wasn't uncovered earlier".

EY said it "regrets that the collusive fraud at Wirecard wasn't uncovered earlier"- EY statement

The once celebrated fintech Wirecard imploded spectacularly in June 2020 after long-time auditor EY refused to sign off on its 2019 accounts, saying €1.9 billion was missing.

Wirecard was forced to admit the money didn't exist and filed for bankruptcy soon after. 

Several top executives including ex-CEO Markus Braun were arrested and are currently on trial for fraud.

As Wirecard's auditor for over a decade, EY came under fire for signing off on the firm's books for years even after media reports raised red flags about accounting irregularities at the German company.

APAS said EY's work on Wirecard's financial statements from 2016 to 2018 had shown "breaches of professional duty", without giving further details.

Five auditors, who were EY employees at the time, have received fines of between €23,000 and €300,000, it added.

Seven others escaped sanctions because they gave up their licences as auditors.

EY said it had learned "important lessons" from the Wirecard saga.

"EY Germany is a different company today," it said, "with a new leadership team and new oversight structures".

EY has a global workforce of more than 350,000, including some 12,000 employees in Germany.

The group lost a number of big clients in the Wirecard fallout, including Commerzbank and Deutsche Telekom, but remains the auditor for Germany's largest lender Deutsche Bank.