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22 September 2008
The revised auditing legislation which entered into force on January 1 2008 implemented new requirements for the independence of auditors, specifically in Article 728 of the Code of Obligations for a regular audit and in Article 729 for a limited audit.
Auditors performing a regular audit may not render other services to the audited company if there is a risk that their own work might become the subject of the audit, even if a 'Chinese wall' is built. By contrast, the requirements concerning a limited audit are less strict - the rendering of other services to an audited company is permissible as long as these services are not provided by the same individual or group.
The primary principle for both ordinary and limited audits is that independence may not be affected either in fact or in appearance. Articles 728(2)(1) to (7) on ordinary audits outline examples which are inconsistent with the requirements that maintain independence in appearance. Since the principle also applies to limited audits, the independence requirements must also be respected by auditors performing such audits.
The law states as follows:
The revised auditing legislation extends the scope of the independence requirements to persons other than the individuals officially identified as auditors. Therefore, the new regulations apply to all persons involved in the audit (Article 728(3)). In this context, ‘involved person’ means all persons who contribute in some way to the auditing process, irrespective of the nature of their contractual relationship to the auditing agency. In joint partnerships and corporations, the independence requirements apply to all members of the highest management and executive body, as well as to other persons involved in the decision-making process, even if they are not involved in the audit. However, the independence requirements are not applicable to ordinary employees who are not involved in the audit, provided that they are not involved in the decision-making process of the audited company (Article 728(4)).
The scope of the independence regulations also extends to:
The independence requirements also apply to companies that belong to the same group as the company to be audited or the auditing agency (Article 728(6)).
Auditors must abstain from a mandate if they cannot ensure their independence. The auditing agency is liable for any loss arising from an audit that was not performed independently. Violation of the independence requirements as such rarely causes loss; however it may lead to the incorrect exercise of duties. Furthermore, any disregard of independence requirements constitutes a lack of lawful organization, which entitles shareholders and creditors to take action against the company.
For further information on this topic please contact Markus Dörig or Philipp Schaller at Badertscher by telephone (+41 1 266 20 66) or by fax (+41 1 266 20 70) or by email (email@example.com or firstname.lastname@example.org). The Badertscher website can be accessed at www.badertscherlegal.ch.
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