At the first Swiss Certified Accountants’ Conference, organized by the Swiss Institute of Certified Accountants and Tax Consultants, President of the Federation of European Accountants André Kilesse spoke about the consequences of the EU’s reform of financial statement audits.
Companies of public interest, which include listed firms and banks, are required to put the mandate of statutory auditor out to public tender after ten years at most. The same auditor may then be appointed on one more occasion for a further ten-year term, after which a different company has to be chosen as auditor. The scope of the non-audit services that the statutory auditor is permitted to provide to companies of public interest has also been restricted, a move that affects tax and valuation work in particular. Member states of the EU are entitled to shorten the rotation period for the statutory auditor and make the terms and conditions governing advisory services more stringent. If they make use of this power, this will create a hodgepodge of national regulations. Whether these will prove a suitable tool for achieving the increase in audit quality so desired by the European Commission appears doubtful in the extreme. With all their links to other countries, publicly traded companies in Switzerland will be affected by the new EU regulations without Swiss law even having to change. What the precise consequences will be, however, remains to be seen.
Duties of the audit committee
One effect of the new EU regulations sees greater onus placed on the audit committee. Its responsibilities include carrying out the procedure to (re-)appoint the statutory auditor. The sharp increase in the number of statutory audit mandates being put out to tender as a result of the rules on rotation will create significant extra work for audit committee members. A panel debate chaired by Prof. Reto Eberle, Audit Partner at KPMG, discussed the situation facing audit committees in Switzerland. The members of the panel – former Federal Councilor Ruth Metzler-Arnold, attorney-at-law Ines Pöschel, Prof. Peter Forstmoser and Councilor of States Konrad Graber – explored the cooperation between statutory auditors and audit committees, including in light of economiesuisse’s revised Swiss Code of Best Practice for Corporate Governance. It is very much in the interests of boards of directors to have their financial reports audited to a high quality, and this includes open, direct communication between auditor and audit committee. There still appears to be potential for improvement here. On the whole, however, auditors and audit committees in Switzerland enjoy a successful working relationship, leading the panel to conclude that there is no need for regulation in this regard.
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