Shortly before Credit Suisse went bankrupt, PWC issued a deceptive statement

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The collapse of Credit Suisse would provide ample material for a suspenseful Netflix series. In it, the accounting firm PWC would play the role of a sinister supporting actress.

As an external auditor, shortly before bankruptcy, he gave the big bank so-called “continuity of business” – in other words: PWC agreed that business at CS could continue. The auditor specifically greenlighted the publication of the annual report and endorsement contained therein, signed by Matthew Falconer (47) PWC’s Global Lead Partner and CS engagement partner, and another PWC expert.

PWC – or PricewaterhouseCoopers – is one of the Big Four, the world’s four largest audit firms, along with Deloitte, EY, and KPMG. PWC is headquartered in London and has 328,000 employees worldwide. In Switzerland, the company operates from Zurich-Oerlikon.

On page 4 of the PWC audit report it states: “Our conclusions are based on audit evidence obtained up to the date of our auditor’s report.” Translated to Accountant German: “Our conclusions are based on audit evidence obtained up to the date of our auditor’s report.”

The date the two experts signed the audit report is explosive. Tuesday, March 14. Just one day later, on Wednesday afternoon, a first meeting on the difficult situation took place at Credit Suisse between representatives of the Swiss government, Swiss National Bank (SNB) and Finma, and UBS President Colm Kelleher (65).

This comes to the attention of the US Securities and Exchange Commission from a document released this week by UBS. At this meeting, it was agreed that definite steps should be taken “by the end of the weekend” regarding Credit Suisse.

On Wednesday evening, SNB and Finma also announced in a joint statement that SNB will provide liquidity to CS “if needed”. It was already time on Thursday night: at 1.49 am the bank sent a message stating that it plans to draw up to CHF 50 billion urgent liquidity from the National Bank.

“PWC should have refused certification”

And all was well, according to PWC on March 14. Swiss governance expert Monika Roth (72) can’t believe it. “PWC must have seen on March 14 that the bank could no longer be saved,” he says. She says she should reject the certificate or threaten to resign. For Monika Roth, the fact that she has yet confirmed is a strong indication that “there is a trade-off between PWC and Finma.”

It is also interesting that Finma confirmed in a joint statement with SNB that “Credit Suisse meets the private equity and liquidity requirements for systemically important banks”.

These statements – endorsement by Finma and PWC – had virtually no value. They make as much sense as realizing that a car roaring against a concrete pillar still has good brakes and has a full tank and adequate washer fluid. This is all true, but soon the car completely disintegrated and all of its occupants were probably dead.

major addictions

“But I’m not surprised that PWC issued the certificate shortly before the collapse,” says the Basel governance expert. It shows that there are “major dependencies” between external auditors and a large bank. “The order volume is in the tens of millions of francs. This creates a false incentive to treat customers with children’s gloves. This is called a conflict of interest for short,” says Roth. According to the annual report, PWC received CHF 78 million for testing services in 2022.

With so much money, it’s understandable that accountants use different cubits. “You can find that large audit firms can be quite confident with smaller, less lucrative assignments. They don’t hesitate to get on the board,” says Roth. He is committed to a system change: “Finma should be hiring the auditor, not the bank itself.”

It’s hard to determine if PWC is doing anything wrong. Bern professor of commercial law Peter V. Kunz (58) says that the role of auditors can actually only control aggrieved shareholders, for example through a private investigation. “But if there is no CS General Assembly in the future, which is most likely, nothing will happen about it.”

According to the Swiss Code of Obligations, the case for revision liability is “plausible”, Kunz says. But he believes such a case would have little realistic chance of success. “But overall, auditors’ audit competencies and audit obligations are somewhat overestimated.”

*Journalist Beat Schmid (54) writes on financial matters on Sunday. Tippinpoint.ch is the publisher of the online media.

Source :Blick