It is limited to interviews, analytical audit actions and detailed audit procedures (only when necessary). It can be fine-tuned for each enterprise or to the wishes of the stakeholders.
Important audit actions are dropped
Within the limited statutory audit there is no obligation for the auditor to participate in the inventory. Also confirmations of third parties for essential receivables and payables are not needed. Furthermore the internal control system (ICS) does not have to be judged. In all these fields the auditor has to base his critical judgement on information provided by the company.
Negative wording of the opinion
As a consequence of the reduced security, which is caused by the reduction of audit actions and fields the audit report is less extensive and the audit opinion is given in negative terms: “Based on our limited statutory examination, nothing has come to our attention that causes us to believe that the financial statements and … do not comply with Swiss law and the company’s articles of incorporation.
Possibilities to raise the benefit
If some or all stakeholders (entrepreneur, shareholders or board of directors) want more reliability, security or benefit there are several options to reach this goal
- More extensive audit actions for more reliability
The board of directors agrees on additional audit actions, and wants the results reported in a separate report addressed to the board. In this case only the audit of the ICS and the extensive report to the board are dropped.
- Voluntary audit of the ICS
If stakeholders want additional certainty if the ICS is working well, the can have audited the existence and functionality of the ICS as well. Alternatively also only parts of the ICS which cause uncertainty can be audited to make sure that they work as expected.
- Specify a focus
It is imaginable that only in certain areas more certainty shall be reached of possibilities of improvement shall be evaluated. To reach this goal stakeholder can define yearly or one-off specific focus issues to be the topic of a deeper analysis and a respective special reporting
- Opting Up
If the stakeholders are not satisfied with the measures mentioned above, the still have the possibility to ask for an ordinary statutory audit with a positive opinion and extensive reporting. From our point of view this may seem reasonable for larger enterprises (turnover of more than 10 Mio. CHF and more than 50 employees) if they do not belong to a group of companies. It my especially make sense if management is separated from ownership.
It is worth taking such steps into consideration if uncertainties for stakeholders exist. In this case they can analyse their risks and then decide to which extent the audit shall be adopted. Because: there is not only black and white. In most cases the limited statutory audit is a good foundation from which – with additional assignments – is very flexible to be adopted to different requirements.
If your analysis of risks and requirements shows additional need, it might make sense to discuss your ideas. Holger Wanke is looking forward to your call.