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Key principles of Swiss audits
The audit obligation is independent of the legal form and is rather linked to the economic relevance. Audit requirements apply to all types of legal entities except sole proprietorships and partnerships.
The law differentiates both the scope of the audit and the person required to provide the auditor with the requirements (the audit authority is responsible for approval). Small and medium-sized companies in particular benefit from the limitation of the audit obligation.
Under Swiss law, the legal entities may be subject to:
- Ordinary audit;
- Limited statutory examination;
- Opt-out or waive the requirement to carry out a limited statutory examination with the consent of all shareholders and if the company does not have more than ten full-time employees on an annual average.
Various other audits may be executed and/or required by stakeholders or authorities, such as AML audits, tax and VAT audits or AVS audits.
Ordinary audit
Companies must seek a statutory auditor to conduct an annual audit of their financial statements. However, the ordinary audit is only planned for economically important companies.
These include:
- Companies that are open to the public, so companies:
- whose shares are traded on the stock market;
- whose bonds have been issued;
- whose assets/turnover contribute at least 20% to the consolidated financial statement.
- Companies who exceed two of the following thresholds for two consecutive financial years:
- CHF 20 million in total assets;
- CHF 40 million in turnover;
- 250 full-time jobs on average per year.
- Companies that must prepare consolidated financial statements;
- Companies whose shareholders holding at least 10% of shares demand an audit opting up;
- Companies whose articles of association or appropriate decision of the general meeting of shareholders so requires.
An ordinary audit is a comprehensive form of audit, which enables the auditors to state with reasonable assurance whether the annual report is free of material misstatements. The auditor examines the existence of an internal system of controls. The auditor will provide a recommendation about whether the financial statements should (or should not) be approved by the shareholders. Their opinion is stated in a final audit report, which is signed by the auditor in charge. The basis for an ordinary audit is the Swiss Auditing Standards. In addition, the auditor provides to the responsible management body or the Chairman of the Executive Board a detailed report with conclusions on the financial reporting, the internal system of controls, and also the conduct and the results of the audit.
Limited statutory examination
If the conditions for an ordinary audit are not met the company submits its annual accounts to a limited statutory examination by an auditor. A limited statutory examination provides less audit assurance as the extent of the auditor’s testing is less than for an ordinary audit. However, limited statutory examinations are often less time-consuming and less expensive than ordinary audits.
Auditors are not required to provide a recommendation about whether or not the financial statements should be accepted by the shareholders. Auditors are only required to state whether they have detected any circumstances which lead them to the conclusion that the financial statements and the proposed appropriation of available earnings do not comply with Swiss Law and the company’s articles of incorporation.
Opting-out
With the consent of all shareholders, the company may waive the requirement for a limited statutory examination given that the company does not have more than ten full-time employees on an annual average.
