ACNews Issue 58 / Q3 2017 | KPMG | CH
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ACNews Issue 58 / Q3 2017

ACNews Issue 58 / Q3 2017

The Audit Committee News informs you about all of the latest trends in its core focus areas of corporate governance, risk management & compliance and corporate reporting. The ACNews features articles penned by experts from Switzerland and many other countries around the world.


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Esteemed Board members,

Auditing is often perceived as a “commodity”. It therefore may seem that it hardly matters which audit firm provides its services. One of the reasons may well be that the profession is highly regulated and has to follow detailed rules, namely, the audit standards. Moreover, the Federal Audit Oversight Authority (FAO) makes sure that audit firms adhere to these standards.

Competition on a market for homogeneous, interchangeable goods is fierce. At the end, the price is the critical factor even in the case of an oligopoly of only four large audit firms (also known as the Big Four). In the past, the price resulting from tenders usually only moved in one direction; this became observable due to the fact that listed companies (and now also companies subject to ordinary audits) have to disclose their audit fees. Is this a healthy development? In recent times, however, many have concluded that not only the price should determine who will be performing the audit. Two particular circumstances have contributed to this change in attitude: on the one hand, audit committees have become more professional by having more financial experts sit on them -- these committee members will not judge an audit firm only by its price. On the other hand, the regulators worry that lower fees will lead to lower quality audits, which is why they demand that companies invest in management and supervision of quality, which also causes the audit firms to rethink their pricing.

All of this is to explain why we decided to dedicate the current edition of this newsletter to the topic of audit quality, taking a moment to look at this topic from various angles. Academia has long been investigating what defines quality and how it can be measured. The global accountancy profession has designed an Audit Quality Framework. The Federal Audit Oversight Authority has defined performance indicators to assess how audit quality has developed over time and across companies. A good audit committee wants an auditor who communicates on an equal footing and that has the courage to also present critical findings. So it only stands to reason that independence holds a protagonist role in all of this. Digitalization also has the potential to revolutionize the auditing industry.

We hope you enjoy the read and look forward to receiving your feedback.

Philipp Hallauer & Reto Eberle


Download the full publication in German below or visit the ACNews in French.

Focus on Audit Quality

What makes for a good year-end audit?

The question what makes a good year-end audit is a popular topic debated by practitioners and researchers alike. Lately, regulators have also become involved in this debate. Above all, it is Audit Committees and audit firms that have to grapple with the topic of audit quality.

Read more: Article by Reto Eberle (in German)

How digitalization impacts audits

Digital innovation is taking giant steps. At this time, it is not clear at all which new technologies will be successful in the next 3-10 years or even unleash a technological revolution. However, what is clear already now is that auditors will have to get ready for a shift in paradigms!

Read more: Article by Mark Meuldijk

IAASB - Audit quality in the focus of the International Auditing and Assurance Standards Board

The IAASB has been focusing on the topic of audit quality for years already in the name of public interest. On the one hand, the International Standards on Auditing directly contribute to the fact that audit quality is held to high and unified standards. On the other hand, the IAASB has two projects explicitly addressing audit quality.

Read more: Article by Annette Köhler (in German)

"Better sassy than servile" - How audit committees assess the work provided by external audit firm

One of the Audit Committee’s core tasks is to supervise the company’s external auditor. In view of the complexity and intensity of the external auditor’s activities, the next question that arises immediately is, what kind of supervision this should be.

Read more: Article by Hubert Achermann (in German)

Audit Quality - the regulator’s perception

An audit’s stakeholders (i. e. board of directors, management, investors and authorities) have to be able to base their decisions on reliably audited financials. A high-quality audit is therefore imperative for the Swiss capital and finance market. With its risk-based audits, the Swiss Federal Audit Oversight Authority (FAO) provides an important contribution to audit quality. Nonetheless, how does the FAO define audit quality and measure progress in quality?

Read more: Article by Frank Schneider (in German)

Independence – will the latest set of EU directives be an impulse for regulatory action in Switzerland?

The Swiss Federal Council has instructed the Department of Justice & Police (DOJP) to determine the legislative need for audit and audit oversight reform in view of regulatory developments in the EU. The new EU directives on independence will most likely be at the heart of this.

Read more: Article by Tara Collins

Key Audit Matters – the auditor speaks its mind

The majority of 2016 annual reports of listed companies have now been published. For the first time, auditors address key audit matters -- i.e. aspects that require special attention. So how does this new addition improve reporting?

Read more: Article by Martin Schaad (in German)

Which factors influence audit fees?

Audit quality has its price. So what is the right (i.e. adequate) price for a specific mandate? The question which factors influence the audit fees is of great interest to the Audit Committee – both in view of the annual assessment as well as for invitations to tender. Academia has also investigated this topic.

Read more: Article by Reto Eberle (in German)

Audit Committee Handbook

The Audit Committee Handbook provides some fundamental principles on which the role of the audit committee is based. It also offers directions and explanations for relevant procedures and practices. These, in turn, help to make an audit committee functional and provide support. The handbook also includes a set of ready-to-go notes to the financial statements, which could be useful to audit committees in their daily work.

Read more: Audit Committee Handbook

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