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Public audit oversight and quality assurance system in Switzerland
 

Public audit oversight and quality assurance system in Switzerland

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Sabine D'Amelio

Sabine D'Amelio

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    Public audit oversight and quality assurance system in Switzerland Public audit oversight and quality assurance system in Switzerland Presentation Transcript

    • Public audit oversight and quality assurance system in SwitzerlandVienna, December 15-16. 2009
      Sabine D‘Amelio
      Deputy Head Legal and International Affairs
      Federal Audit Oversight Authority, FAOA
    • Overview
      2
      Introduction
      Organization
      Licensing
      Oversight
      International cooperation
    • Introduction (1)
      Main characteristics of the Swiss market
      Population of 7.7 million
      GDP per capita (PPP) of approximately USD 40,000
      98% of Swiss Market Capitalization is audited by PwC, KPMG and EY
      17 audit firms audit listed companies
      29 audit firms under state oversight
      Switzerland - unlike the other EFTA-Member-State - is not part of the European Economic Area (EEA) and therefore does not have to implement the 8th EU Directive
      Small domestic market -> export oriented economy: Swiss PIE are often listed on foreign stock exchanges
      3
    • Introduction (2)
      Reasons for creating an independent oversight authority
      Obvious limits to Self-regulation of the profession
      Objective to improve audit quality
      International developments (SOX USA / 8th EU-Directive)
      4
    • Introduction (3)
      September 2007
      Audit Oversight Act (AOA) comes into force
      FAOA starts its operational activities
      January 2008
      Revised Company Law comes into force
      Different levels of audit are introduced (limited vs. ordinary audit)
      April 2008
      FAOA begins its inspection activities for public interest entities
      5
    • Organisation (1)
      6
    • Organisation (2)
      7
      Purpose of Audit Oversight Act
      Assuring proper performance and quality of audit services
      Responsibilitiesofthe FAOA
      Licensing ofauditorsandauditexperts
      Oversightofauditfirmsauditinglistedcompanies
      International cooperation
    • Organisation (3)
      Resources
      8
    • Organisation (4)
      9
      • Budget 2009
    • Licensing (1)
      Categories of licenses
      10
    • Licensing (2)
      Licensing process
      Electronic licensing via internet: http://www.revisionsaufsichtsbehoerde.ch
      After decision, automatic inclusion in the Public Register
      Information in the register has to be updated by the license holder
      License for individuals are unlimited (possibility to withdraw)
      License for audit firms are reviewed every 5 years
      11
    • Licensing (3)
      Provisionallicensingsystem
      12
      01.09.07
      30.06.10
      31.12.07
      provisionallicense
      final license
      • conversion prov. license in final license
      • auditservicesprovidedwith a provisionallicense
      remain valid evenif final licensecannotbegiven
    • Licensing (4)
      Licensing statistics as of november 2009
      13
    • Oversight (1)
      Inspections of audit firms under state oversight
      Inspections at least every three years
      The three largest Audit Firms are inspected every year:
      98% of the market capitalization of the Swiss stock exchanges
      international practice
      All others every three years
      FAOA may stagger the inspections by time and content
      14
    • Oversight (2)
      1 Data fromthe Register ofthe FAOA (accordingtheselfdeclarationoftheauditfirmsunderstateoversight). As August 27, 2009 thebasicsetare 499 publiclytradedcompanies (including 157 substantial rolecompaniesand 42 companieswithbondsoutstanding).
      2 Data fromthe Register ofthe FAOA (accordingtheselfdeclarationoftheauditfirmsunderstateoversight). As August 27, 2009 thebasicsetare 300 publiclytradedcompanies (without substantial rolecompaniesandcompanieswithbondsoutstanding).
      15
    • Oversight (3)
      Principles of the inspection process
      Cooperative approach vs. formal investigation
      Risk based
      Fact based
      International recognized inspection standards
      Same principles for all audit firms under state oversight
      16
    • Oversight (4)
      General process of an inspection
      Initial contact with firm
      Formal letter with document and interview request
      Communication of engagements selected for review
      “Surprise list” for file review
      On-site engagement review and quality control process evaluation
      Reporting
      Maximum time limit of 12 months to restore orderly situation
      Investigation
      17
    • Oversight (5)
      Scope of FAOA inspections
      Examination of accuracy of information provided and updated in the licensing application
      Firm reviews: Internal Control Review on quality assurance system and compliance with other provisions
      File reviews: Inspection of audit work papers
      18
    • Oversight (6)
      Firm Review
      BASIS = QUALITY CONTROL SYSTEM = ISQC1
      Tone at the top – Leadership responsibilities for quality within the Firm
      Ethical requirements – Monitoring of Independence Standards
      Acceptance and continuance of client relationship
      Human resources (recruiting, development, remuneration, etc.)
      Engagement Performance - Audit methodology
      Engagement Quality Control Review (Concurring partner review / Consultation process)
      Monitoring (internal quality review)
      19
    • Oversight (7)
      File Reviews
      Goal: Compliance with internal and external standards
      Continuous improvement of audit quality
      Large firms probably have good systems but are they followed?
      Risk based selection (influence of internal quality assurance – monitoring)
      No audit of the audit
      20
    • Oversight (8)
      Extractofcommunfindings in thepasttwoyears
      EQCR participationis not sufficient/not documented/toolate.
      ISA 545: fair valueconsiderations
      ISA 600, 610 and 620: Expert workandprof.competence not challenged/workofotherauditors not challenged
      ISA 230: documentation not sufficient
      ISA 240: prof.skepticism = rely on pastexperience
      Goodwill Testing: keyassumptions not challenged
      Revenue recognition not adressedassignificantrisk
      21
    • Oversight (9)
      Reporting
      Comment Form for each finding
      Draft written inspection report including comment forms made available to the Audit Firm for comment
      Firm to respond and propose measures for remediation
      FAOA issues final written report
      Annual activity report (http://www.revisionsaufsichtsbehoerde.ch/bausteine.net/file/showfile.aspx?downdaid=7476&sp=D&domid=1063&fd=2)
      22
    • Oversight (10)
      Logistics
      Templates
      Formal announcement of inspection with all information required
      Comment forms
      Inspection reports
      IT-software to document the inspections
      Clear inspection strategy: On-site inspections versus questionnaires, risk based approach, criteria for risk selection, etc.
      23
    • International cooperation (1)
      • Multilateral level
      • FAOA is a member of the International Forum of Independent Audit Regulators (IFIAR : http://www.ifiar.org)
      • German/Austrian/Swiss forum
      • Bilateral level
      • Rules for the implementation of a system of mutual recognition for companies operating internationally
      • Rules for cooperation/transfer of information with foreign oversight authorities
      • Rules for cross-border oversight activities
      24
    • International cooperation (2)
      • Registration/oversight of third country auditors
      • If third country audit firm is subject to oversight by a recognized foreign oversight authority
      • Only minimal registration requirements with the FAOA
      • No direct oversight by the FAOA
      • Full recognition of inspection activities of the foreign oversight authority
      • Transmission of inspection reports only if deemed necessary
      25
      • Registration/oversight arrangements for third country auditors will enter into force once the main partner oversight authorities have been recognized by the FAOA/Swiss Government
      • No need for a transitional period
    • International cooperation (3)
      • Conditions for mutual recognition
      • Equivalence of the foreign oversight authority
      • Principle based approach
      • In principle no joint inspections to assess equivalence
      • Authority complies with requirements for cooperation (Art. 26/27 AOA)
      • Possibility to rely on the assessment by other authorities
      • Possibility to require reciprocity
      26
      • Swiss FAOA will start mutual recognition assessments in 2010
    • International cooperation (4)
      Transfer of confidential information
      Foreign authority uses information received exclusively for the direct oversight of persons and firms that provide audit services
      Foreign authority is bound by official or professional secrecy
      Information received can only be passed on to authorities and bodies that carry out oversight duties that are in the public interest and are bound by official and professional secrecy, on the basis of authorization in a treaty or with the prior consent of the FAOA
      27
    • Thankyouforyourattention
      For further information please contact:
      sabine.damelio@rab-asr.ch
      28