public audit oversight and quality assurance system in switzerland
DESCRIPTION
Sabine D'AmelioTRANSCRIPT
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Sabine D‘Amelio
Deputy Head Legal and International Affairs
Federal Audit Oversight Authority, FAOA
Public audit oversight and quality assurance system in Switzerland
Vienna, December 15-16. 2009
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Overview
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Introduction Organization Licensing Oversight International cooperation
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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)
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Organisation (1)
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BoardChairman Prof. Hans Peter
Walter VC Thomas Rufer+ three members
Executive DirectorFrank Schneider
OversightFrank Schneider
Legal / International Affairs
Reto Sanwald
Admission / Support
Jürg Bloesch
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Organisation (2)
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Purpose of Audit Oversight Act Assuring proper performance and quality of audit
services
Responsibilities of the FAOA Licensing of auditors and audit experts Oversight of audit firms auditing listed companies International cooperation
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Organisation (3)
Resources
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Resources Background
Management 3
Licensing 10 Administrative
Legal & International 4 Lawyers/Attorneys at law
Oversight 43
Experienced chartered accountantsRetired Partners working on a ad-hoc basis
Administrative 2 Administrative
Total 26 per capita 22.1 on a 100% calculation
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Organisation (4)
Million Euro Description
Income 2 Oversight charges
0.66 Inspection fees
0.66 Registration fees
3.3 Total
Expenses 2.8 Expenses FAOA
0.53 Accumulation of reserves
3.3 Total
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Budget 2009
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Licensing (1)
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Type of licenses Audit activities Oversight activities FAOA
Auditors Limited audits LicensingAudit experts Ordinary audits LicensingAudit firms under state oversight Ordinary audits of PIE Licensing and oversight
Categories of licenses
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Licensing (3)
Provisional licensing system
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01.09.07 30.06.1031.12.07
provisional license final license
conversion prov. license in final license audit services provided with a provisional license
remain valid even if final license cannot be given
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Licensing (4)
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Type of registration Auditor Audit Expert Total
Individuals 1’866 4’872 6’738Sole proprietorships 327 419 746Audit firms 705 1’789 2’494Audit firms under state oversight - 29 29Total 2’898 7’109 10’007
Licensing statistics as of november 2009
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Oversight (2)
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PwC38%
KPMG22%
E & Y22%
Deloitte
6%
BDO5%
Others6%
Number of audited listed entities per audit firms under state oversight
as of August, 2009(all publicly traded companies)1
PwC37%
KPMG22%
E & Y22%
Deloitte
6%
BDO
5%
Others8%
Number of audited listed entities per audit firms under state oversight as of August 2007,
20092
1 Data from the Register of the FAOA (according the self declaration of the audit firms under state oversight). As August 27, 2009 the basic set are 499 publicly traded companies (including 157 substantial role companies and 42 companies with bonds outstanding).
2 Data from the Register of the FAOA (according the self declaration of the audit firms under state oversight). As August 27, 2009 the basic set are 300 publicly traded companies (without substantial role companies and companies with bonds outstanding).
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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)
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Oversight (8)
Extract of commun findings in the past two years EQCR participation is not sufficient/not documented/too late. ISA 545: fair value considerations ISA 600, 610 and 620: Expert work and prof. competence not
challenged/work of other auditors not challenged ISA 230: documentation not sufficient ISA 240: prof. skepticism = rely on past experience Goodwill Testing: key assumptions not challenged Revenue recognition not adressed as significant risk
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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)
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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.
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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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
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Swiss FAOA will start mutual recognition assessments in 2010
Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
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
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Eidg. Revisionsaufsichtsbehörde RABAutorité fédérale de surveillance en matière de révision ASR
Autorità federale di sorveglianza dei revisori ASR
Thank you for your attention
For further information please contact:
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