Annual Report 2016

4
Foreword | FAOA 2016
Foreword
In the first year of its 2016–2019
strategy period, the FAOA has
taken the initial steps toward its
implementation. On the one hand,
cooperation and contact with national
and international audit stakeholders
was further developed. On the
other hand, the publication of legally-binding
court rulings (in anonymous
form) and FAOA enforcement
principles made the enforcement
process more transparent. Besides
implementing the strategy, the
focus of the FAOA continues to be
on its main legal responsibilities.
We would like to take this opportunity
to thank FAOA staff sincerely for
the great dedication with which they
perform the tasks of the FAOA and
realise the current strategy.
State-regulated audit firms
The larger audit firms in Switzerland
generated more audit fees overall
during the year under review. This fee
increase is pleasing but should not
obscure the fact that pressure remains
on the Swiss audit market and audit
fees, particularly during the tendering.
The higher fees compared to the
prior year relate largely to non-recurring
audit work (e.g. forensics). When
tendering the audit and approving
annual audit fees, audit committees
and boards have a duty to ensure that
an efficient and effective audit can be
performed for the proposed fee.
In the future, the auditor’s report to
the general meeting of quoted companies
will also contain information
on key audit matters evaluated during
the audit. The comprehensibility
of audit reports to investors and other
addressees will be improved considerably
by the new requirements of ISA
701, respectively FAOA Circular No.
1/2015. The enhanced reporting will
lead to disclosure of the most significant
financial risks and complex matters
the auditor sees and the related
audit procedures. The auditor’s risk
considerations will therefore be visible
not only to the board of the audited
company but also to investors and
other stakeholders. The quality of the
audit process can thus be evaluated
better and competition between audit
firms can hinge more on qualitative
arguments.
Audit digitalisation
Increasing digitalisation is also changing
audit fundamentally. Modern
technologies, such as data analytics,
point to new possibilities. For example,
a whole database can be audited
in an automated way and, on the
other side, manual sampling based
on defined criteria can be reduced.
The auditor will still have a valuable
role to play here: The auditor’s profound
business knowledge is needed
to ask the right questions in the data
analytics and to recognise relevant relationships.
The auditor’s experience
is also needed to question management’s
estimates. However, the profession,
or rather the demands on the
auditor, are changed significantly by
this development.
Artificial intelligence technologies
of the future are being discussed intensely
today. Mid-term, such technologies
have the potential to support
the auditor, particularly in the
area of auditor judgement. However,
professional scepticism toward apparently
correct information is likely to
remain a human trait which is hardly
replaceable.
Another significant question is whether
all audit firms can or want to make
the necessary investment in digitalisation.
In this area, smaller audit firms
would be well-advised to join forces
and finance the necessary investments
together. It also appears possible for
audit firms to outsource this field to
specialized companies.
Overall, reporting developments and
emerging technological advances are
to be seen as opportunities for the audit
profession to improve audit quality
and make the benefits of audit more
apparent to the public. The new enhanced
audit report requires a more
intensive examination of the audit
engagement and will increase confidence
in the audit. Mid-term, the audit
profession will change considerably,
generally-speaking become more
relevant and, most certainly, continue
to exist in a new form in the future.