“As auditors, we have to view our clients' work with professional skepticism”

Audit : Trends and challenges

In an interview, Lukas Marty points out why auditing can be a support to enterprises, particularly in times of economic uncertainty, and explains why growing digitization will not make auditors obsolete.

Partner, Head of Audit, Member of the Executive Committee

KPMG Switzerland

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What are the topics dominating this year’s financial reports?

The appreciation of the Swiss franc in January 2015 left a huge mark on the annual financial statements of businesses in a great number of different industries. Some of the companies hit hardest by lower sales and margins were industrial firms that produce in Switzerland and export to the eurozone. Converting the balance sheets of European subsidiaries is placing a burden on equity.

Lower margins and profits are also having an impact on valuations: since some goodwill from past acquisitions is proving unrecoverable as a result of changes in the general economic conditions, impairment losses had to be recognized accordingly.

Various corporations responded with adjustments to their strategies and portfolios. Some business units are being sold and others are being bought. These kinds of transactions were also very common in some annual financial statements in 2015.

Did the low interest rate environment also leave its mark?

Absolutely. While businesses might be reaping the benefits of low financing costs and many were able to tie their financing to the low interest level in 2015, both the low interest rates and otherwise low returns on assets are negatively impacting pension fund obligations. Generating a high-enough return on pension fund assets to cover pension promises or minimum interest rates on savings capital is nearly impossible at the moment. For companies preparing their balance sheets in accordance with international financial reporting standards, 2015 brought yet another increase in the pension obligations they need to recognize.

Do you think that growing digitalization will eventually make auditors obsolete?

No, definitely not. Modern technologies open up new possibilities in auditing, especially when it comes to data collection and analytics. One of those also includes automatically screening an entire data pool according to specific criteria rather than performing manual spot checks. Yet an auditor’s profound knowledge and broad experience are still pivotal in ensuring that the right questions are asked during data analytics and that relevant contexts are recognized. An auditor’s experience is also called for when scrutinizing assessments made by upper management. 

How can an audit assist companies during times of economic turmoil?

Businesses are always in motion. Not only do they have to develop their products and services but they have to continuously ask themselves whether their organization is well positioned, whether their cost structures are correct, whether processes have optimization potential and whether or not geographic relocations might be effective. Constant monitoring of key data has to guarantee that the processes within a company work at all times, even during complex restructuring.

As auditors, we play a vital part in this by taking a critical look at our clients’ work: Do executive committees and boards of directors have the right basis for decision-making? Do they have the right information for correctly assessing the consequences of restructuring or a relocation, for instance? Interdisciplinary teams with extensive experience are the best way to guarantee our clients top-notch audit and advisory services. KPMG invests a great deal in its employee development. Our solid local and international network puts us in a position to offer our clients proven specialists in every key topic area.

How does KPMG always manage to attract new young talent for its Audit team?

We mainly recruit university and college graduates. It’s a well-known fact that auditing is an interesting way to launch a career. It not only offers young employees a swift insight into a wide range of different companies but also gives them a chance to acquire broad-based expertise as they train to become certified accountants. The combination of project work for our clients and structured, part-time training is extremely attractive.

KPMG is proud of the fact that, for years now, our employees have been achieving above-average results on their certified accountant examinations. Lots of students know that, too. But it’s also the subsequent career opportunities, like those involving extended stays abroad, that attract young talent to KPMG.

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