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Credit Suisse audit exposes ‘material weakness’ in internal controls

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By Charbel Kadib
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3 minute read

The global investment bank’s internal controls over financial reporting has been found to be ineffective in detecting and assessing the risk of “material misstatements”. 

Credit Suisse has published its 2022 annual report, detailing the findings of an external review of its internal control mechanisms, aimed at assessing whether the bank has provided “reasonable assurance” regarding the reliability of its financial reporting.

This includes the preparation of financial statements for external stakeholders in compliance with Swiss law. 

The review found that as at 31 December 2022, the bank’s internal processes were “not effective”, given it did not “design and maintain an effective risk assessment process” used to identify and analyse the risk of” material misstatements”. 

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Credit Suisse’s board of directors acknowledged “material weakness”, which may have resulted in misstatements of account balances or disclosures. 

Further, the report noted observations from global consultancy firm PricewaterhouseCoopers (PwC), which found Credit Suisse “did not design and maintain an effective risk assessment process”.

However, despite acknowledging these gaps, Credit Suisse stressed its financial statements as at 31 December 2022 comply with Swiss law.  

Credit Suisse Group’s board of directors and executive board have worked continuously in recent years to improve the control environment surrounding financial reporting with increased investment and additional resources and are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that the material weaknesses are remediated with the highest priority, the investment bank noted. 

The bank is reportedly developing a remediation plan to address shortcomings.  

The findings come amid ongoing concern over the investment bank’s capital position following a sharp spike in investor outflows. 

The bank acknowledged “significantly higher withdrawals” of cash deposits and non-renewal of maturing time deposits over the fourth quarter of 2022.

These outflows “substantially exceeded” the rates experienced in the previous quarter, up from AU$21 billion to AU$180 billion. 

Accordingly, total assets under management (AUM) thinned from AU$2.3 trillion to AU$2.1 trillion.  

When compared to the previous corresponding period, the group’s reported earnings slipped 33.2 per cent to approximately $5 billion. 

However, according to Credit Suisse, outflows stabilised over the latter part of the fourth quarter, falling to “much lower levels”. 

 

Credit Suisse audit exposes ‘material weakness’ in internal controls

The global investment bank’s internal controls over financial reporting has been found to be ineffective in detecting and assessing the risk of “material misstatements”. 

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