A leading international insurance major serving commercial, institutional and consumer customers in more than 130 countries struggled to manage its financial reconciliation process, due to its size, disparate business units and poor internal controls. The problem ultimately led to misstatements on the balance sheet that resulted in an adverse “material weakness” opinion from its auditors.
Essentially, internal finance groups lacked effective reconciliation processes. Internal groups noted where reconciliations were necessary without making them on the balance sheets. Working against the groups was the sheer amount of transactions, which covered 14,000 accounts in more than 200 entities.
As reconciliations accumulated, their finance groups became increasingly unable to close the books resulting in the “material weakness” designation.