Activity Report 2015

22 Financial Audit | FAOA 2015
Following close interaction with IFI-
AR the IAASB developed a draft of a
discussion paper on improving audit
quality. The discussion paper covers
the focus areas audit quality, group
audits, audits of financial institutions
and professional scepticism. From the
perspective of the oversight authorities,
other important topics, e.g. determination
of materiality, currently
remain excluded however.
The thematic inspection of «letterbox»
public company audits carried
out by the FAOA at the three largest
audit firms last year 25 was dealt
with by the IAASB in its Staff Audit
Practice Alert of August 2015 26 . The
IAASB considered the comments of
the FAOA, together with those of the
UK and Dutch oversight authorities 27 .
As the IAASB has recognised the growing
importance of group audits it is
currently preparing a draft of a discussion
paper that will detail possible
solutions. Like the FAOA 28 the IAASB
emphasises that the responsibility of
the auditor-in-charge for the direction,
supervision and performance
of the engagement can neither be
transferred nor delegated. The requirements
of «Quality control for an audit
of financial statements» (ISA 220)
apply to all audits. In particular this
covers the responsibility of the auditor-in-charge
in the following areas:
− Overall audit quality (ISA 220.8);
− Appropriateness of conclusions
drawn in the acceptance and continuance
process (ISA 220.12);
− Direction, supervision and performance
of the audit engagement
in accordance with professional,
legal and regulatory standards (ISA
220.15);
− Performance of working paper review
procedures in accordance with
the firm’s policies and procedures
(ISA 220.16);
− Review of the audit documentation
and discussions with the engagement
team to be satisfied that sufficient
appropriate audit evidence has
been obtained to support the conclusions
reached and for the auditor’s
report to be issued (ISA 220.17).
Points of focus for 2016
inspections
As communicated in its newsletter of
December 2015, the FAOA will focus
on the following points in its regular
2016 inspections:
Financial audit
− Audit of income tax positions in
the income statement and balance
sheet (ISA 540/IAS 12)
− Audit of the cash flow statement
(ISA 500/IAS 7)
− Audit of earnings per share in complex
cases (ISA 500/IAS 33)
Regulatory audit
− Audit of compliance with risk management
and risk control requirements
(Art. 12 BankO, Art. 7 LiqO,
Art. 12a CISO)
− Audit of compliance with AMLA
requirements; particularly high risk
transactions (Art. 12 to Art. 19 AM-
LA-FINMA)
− Using the work of the internal auditor
and involvement of external experts
(Art. 5 para. 2 and 3 FINMAO,
as well as FINMA Circular 2013/3
margin notes 48 and 49).
Particular attention will be paid as to
whether there is evidence that appropriate
professional scepticism was applied
in performing the above audit
procedures.
Further points of focus arise from the
individual analysis of specific circumstances
and relate to the application
of auditing or accounting standards.
Cooperation with audit
committees
Similar to the FAOA, the audit committee
must assess and critically
question the quality of the auditor’s
work. Given this similarity of interests
the FAOA has intensified its contact
with audit committees over the last
two years. For example, as part of
the inspections of state-regulated audit
firms interviews are regularly held
with the audit committee chairmen
of PIE companies. The aim is to gain
a better picture of the cooperation
between the auditor and the audit
committee. In addition, the FAOA issued
a guide for audit committees 29 .
Importantly, the FAOA has repeatedly
criticised the lack of professional
scepticism of individual auditors in
prior years. The FAOA hopes that professional
cooperation between auditor
and audit committee will lead to
increased professional scepticism by
the auditor towards management,
particularly if the audit committee
creates an environment in which the
auditor can question management in
an appropriately critical manner.
To be able to assess and question the
work of the external auditor adequately
it is imperative that the audit committee
is composed appropriately. The
Swiss Code contains relevant recommendations
in this regard. The Code
suggests that a qualified financial expert
is required only in complex cases.
25 Certain Swiss public companies only have
a registered office in Switzerland and
those responsible for the supervision and
management of the group, as well as its
accounting function, are abroad.
26 www.ifac.org > publications-resources >
staff-audit-practice-alert
27 UK Financial Reporting Council’s Audit
Quality Inspection’s Annual Report
2013/2014, Netherlands Authority for Financial
Markets Results of the inspection
of the quality of statutory audits at the Big
4 audit firms, 25 September 2014.
28 www.rab-asr.ch > Oversight > Information
of the FAOA
29 www.rab-asr.ch > Oversight > Information
of the FAOA > Information for audit committees