Glossary

A

advisory (consulting)

Consulting (advisory) services are services in which a competent third party helps to clarify matters and issues so that the consulting client can take responsibility for issues and resolve them independently. Consulting engagements require technical skills, training, experience and knowledge of the consulting process.
The consulting process is an analytical process that typically involves a combination of the following activities: objective-setting, fact-finding, definition of problems or opportunities, evaluation of alternatives, development of recommendations including actions, communication of results, and sometimes implementation and follow-up. Reports (if issued) are generally written in a narrative (or “long-form”) format. Generally the work performed is only for the use and benefit of the client.

 

assurance engagement

An “assurance engagement” (as defined by the IAASB) is an engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria. The outcome of the evaluation or measurement of a subject matter is the information that results from applying the criteria.

There are reasonable assurance engagements and limited assurance engagements. The nature and purpose of the engagement are set out in the Swiss Standards on Auditing (PS).
Not all engagements carried out by practitioners are assurance engagements. Engagements that do not meet the above definition include:

• Engagements classified by the Swiss Standards on Auditing as related services, such as agreed investigations concerning financial information or the compilation of financial information,
• Preparation of tax returns where this does not lead to a conclusion that provides assurance,
• Consulting engagements, e.g. management consulting or tax consulting.

An assurance engagement may be part of a larger engagement, for example, if an advisory engagement for a business acquisition includes a requirement to provide assurance on past or future financial information. In such cases, the framework is only relevant for the assurance engagement component.

 

audit

Audits primarily enable the auditor to express a conclusion about the outcome of the evaluation or measurement of a subject matter against criteria. The first objective of the audit process is therefore to be effective, i.e. to draw a conclusion with reasonable assurance. The second objective is to be efficient, that is, to conduct the audit at a reasonable cost.

 

audit of financial statements

An audit of financial statements is a type of application of an assurance engagement to obtain reasonable assurance. The purpose of an audit of financial statements is to enhance the degree of confidence of the intended users in the financial statements. This is achieved by the auditor expressing an audit opinion in a written report on the financial statements, stating whether the financial statements have been prepared, in all material respects, in accordance with the applicable accounting principles or legal requirements. The auditor expresses this opinion based on an audit performed in accordance with the Swiss Standards on Auditing and the applicable ethical requirements.

An audit of financial statements ordinarily involves the audit of the annual financial statements and, if applicable, the group financial statements of a company by an independent third party with the necessary professional competence (usually by the auditor). There are statutory audits of financial statements (in accordance with the Swiss Code of Obligations, the Swiss Civil Code and special laws, e.g. ordinary and limited audits) and audits of financial statements that are carried out on the basis of contractual agreements.
Audits of financial information prepared in accordance with appropriate criteria have a similar objective.

 

audit procedures (agreed upon)

see “examination procedure (agreed-upon)”

 

auditing

From a functional point of view, auditing includes all assurance engagements and related assurance services in the economic field.

Auditing in the sense of audits of financial statements deals with the control of companies’ financial reports in accordance with the applicable financial reporting regulations. This involves checking whether the actual presentation of the assets, liabilities, financial position and profit or loss by the financial report or by the balance sheet (the actual situation) corresponds to the target situation as expressed in the financial reporting regulations. The main task of an auditor is therefore to check without bias whether business transactions have been properly recognised in the financial statements in accordance with the financial reporting regulations.

However, auditing also includes all assurance engagements in which a practitioner expresses a conclusion about the outcome of the evaluation or measurement of a subject matter against criteria.

 

auditor

The person or persons conducting the audit, usually the engagement partner or other members of the engagement team, or, as applicable, the firm. Where a Swiss Standard on Auditing expressly intends that a requirement or responsibility be fulfilled by the engagement partner, the term “engagement partner” rather than “auditor” is used.
In the case of audits in accordance with special laws (e.g. capital increase, capital reduction, merger, etc.), the name of the audit in question is placed before the auditor’s name.

 

auditor

Statutory auditor in accordance with Swiss law appointed by the governing bodies of the company.

 

auditor

Auditors examine and certify annual and consolidated financial statements that are prepared on the basis of financial reporting standards. They do this within the context of ordinary and limited audits. In addition, auditors perform special legal audits in accordance with the provisions of the Swiss Code of Obligations as well as other assurance engagements and provide related services (e.g. in the area of due diligence).

 

C

certification

Certification is a process by which compliance with certain requirements is demonstrated.

 

confidence-building assurance services

From a technical point of view, i.e. from the perspective of the framework of assurance engagements and the classification of services carried out in this context, confidence-building assurance services are subdivided into assurance engagements (with the characteristics of an audit or verification in the narrower sense as well as review), related services (agreed-upon procedures, compilations) and consultancy engagements. Confidence-building assurance services are those services that can be classified as audit, assurance and advisory.

 

E

entity/corporation/firm

The entity to be audited may be a company, a sole proprietorship, a simple partnership, a local government body, a public-law institution, a group or a legally undefined economic entity. Using solely the term “company” would therefore be insufficient. An entity may refer to a dependent subsidiary or sector that produces its own accounts.

 

ethical requirements

Relevant ethical requirements include independence, integrity, objectivity, professional competence and diligence, confidentiality, professional conduct and compliance with legal provisions and standards. They are implemented by the Code of Conduct and Professional Rules, the Guidelines on Independence and the Guidelines on Continuing Education issued by EXPERTsuisse. The Code of Conduct and Professional Rules regulates the conduct of practitioners (see EXPERTsuisse, Code of Conduct and Professional Rules, 2007). They must perform their duties in a manner that justifies the trust placed in them. They must carry out their duties with due diligence within the framework of the applicable legal system and to the best of their knowledge and must refrain from any activity that is incompatible with the reputation of the profession. Special guidelines issued by EXPERTsuisse (Guidelines on Continuing Education (RzW) and Guidelines on Independence (RzU)) describe the requirements in concrete terms.

 

examination procedure (agreed-upon)

An agreed-upon procedures engagement may include specific procedures to examine individual items of financial information (for example, an entity’s payables, receivables, related party transactions, and segment revenues and profits), a financial statement (for example, a balance sheet), or a complete set of financial statements.

The agreed-upon procedures may include inquiries, analyses, recalculations, comparisons, observations, inspections, other purely formal checks and the obtaining of confirmations.

In an agreed-upon procedures engagement, the practitioner carries out those procedures of an audit nature to which the practitioner and the entity and any appropriate third parties have agreed and to report on factual findings. The persons mandating the procedures may be representatives of the entity or third parties.

 

F

financial information

Information expressed in financial terms in relation to a particular entity, derived primarily from that entity’s accounting system, about economic events occurring in past or future time periods or about economic conditions or circumstances at points in time in the past or in the future.

 

financial information (historical)

Information expressed in financial terms in relation to a particular entity, derived primarily from that entity’s accounting system, about economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past.

 

financial information (prospective)

“Prospective financial information” (hereafter “prospective information”) is based on assumptions about events that may occur in the future and possible actions by an entity. It is highly subjective in nature, and preparing such information requires the use of considerable discretion. Prospective information can be in the form of a forecast, a projection or a combination of both (e.g. budget for the coming year plus five-year forecast).

 

financial statements

A structured representation of historical financial information, including related notes, intended to communicate an entity’s economic resources or obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework. The related notes ordinarily comprise a summary of significant accounting policies and other explanatory information. The term “financial statements” ordinarily refers to a complete set of financial statements as determined by the requirements of the applicable financial reporting framework, but can also refer to a single financial statement.

 

firm

A sole practitioner, sole proprietorship, partnership or corporation or other entity of professional accountants.

 

framework

EXPERTsuisse’s framework for assurance engagements defines and describes the elements and objectives of an assurance engagement, and identifies engagements to which the relevant Swiss Standards on Auditing apply. It establishes a reference framework for practitioners.

 

H

historical information

see «information (historical)»

 

I

information (historical)

Information in relation to a particular entity about economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past.

 

information (prospective)

Information in relation to a particular entity about economic events occurring in future time periods or about economic conditions or circumstances at points in time in the future.

 

L

lead auditor

The partner or other person in the audit firm who is responsible for the audit engagement and its performance, and for the auditor’s report that is issued on behalf of the audit firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body. The synonym “engagement partner” is also used.

 

level of assurance

Refers to the judgement of the auditor regarding the reliability of assertions. During an audit, the auditor confirms with reasonable assurance that the information does not contain any material misstatements. During a review or limited audit, the auditor confirms that nothing has come to his/her attention that causes him/her to believe that the information does not comply with the applicable financial reporting framework in any material aspects..

 

licensed audit expert

To be licensed as an auditor, individuals must fulfil the requirements for training and professional practice and have an irreproachable reputation (cf. Art. 4 para. 1 Auditor Oversight Act (RAG)). The requirements for professional practice are generally higher than for a licensed auditor; practical experience is required, the length of which depends on the type of training (cf. Art. 4 para. 2 RAG). However, for federally certified accountants, the professional practice proven by their training certificate is sufficient. An ordinary audit and certain statutory special audits may only be carried out by a licensed audit expert (Art. 727b para. 2 SCO).

 

licensed auditor

To be licensed as an auditor, individuals must fulfil the legally defined requirements for training and professional practice and have an irreproachable reputation (cf. Art. 5 and Art. 4 para. 2 Auditor Oversight Act). For persons who do not have the Swiss Certified Public Accountant diploma, professional practice of one year is required in addition to their training qualification. Persons who hold the Swiss Certified Public Accountant diploma can be directly licensed as audit experts. A limited audit requires at least approval as an auditor (Art. 727c SCO).

 

limited (audit) assurance

The objective of a limited assurance engagement (e.g. limited audit or review) is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement, as the basis for a negative form of expression of the practitioner’s conclusion.

 

limited audit (review)

Limited audits are governed by Art. 729 et seq. SCO. The nature and purpose of limited audits are defined in the Swiss Standard on Limited Audits (SER). The objective of a limited audit is to obtain an assertion from the auditor (officially appointed) as to whether it has discovered facts that lead it to conclude that the annual financial statements and the proposal for the appropriation of the balance sheet profit do not comply with the law and the articles of association. The auditor makes this assertion on the basis of inquiries, analytical procedures and appropriate detailed audits, which provide less extensive evidence than the procedures to be carried out as part of an ordinary audit.

 

N

non-financial information

Information that is not based on the usual financial ratios, but which nevertheless makes the key value-added areas of a company understandable to stakeholders. Key non-financial indicators that are also used for internal corporate management.

 

O

ordinary audit

Ordinary audits are governed by Art. 728 et seq. SCO. An ordinary audit is an examination by the statutory auditors (appointed by the company’s governing bodies) to determine whether the annual financial statements and, if applicable, the group financial statements comply with the law, the articles of association and the chosen framework, whether the proposal of the board of directors to the general meeting of shareholders regarding the appropriation of the balance sheet profit complies with the law and the articles of association, and whether an internal control system exists. An ordinary audit is an “assurance engagement”, i.e. an engagement in which a practitioner expresses a conclusion about the outcome of the evaluation or measurement of a subject matter against criteria. The nature and purpose of the engagement are set out in the Swiss Standards on Auditing (PS). In the auditor’s report on the ordinary audit, the practitioner provides reasonable assurance.

 

other services

Other services are services provided by a practitioner that, in accordance with the engagement, do not lead to an audit statement or conclusion. When accepting engagements for the provision of other services, the practitioner must comply with the ethical requirements.
– see also “related services”

 

P

practitioner

Self-employed auditors as well as auditors and other specialists in audit firms that provide statutory audit services as well as contractual (assurance) engagements and related services.

The term “practitioner” includes all employees of the (audit) firm who provide services to audit clients (auditors, tax experts, fiduciary experts, lawyers, consultants, etc.).

 

professional announcements

EXPERTsuisse’s professional announcements include the Swiss Quality Assurance Standards (QS), the Framework for Assurance Engagements, the Swiss Standards on Auditing (PS), the Swiss Audit Notices (PH), the Swiss Accounting Position Statements (RS) as well as Q&A documents and professional communications aimed at ensuring the quality of the auditor’s services. Other announcements made by EXPERTsuisse relate to behavioural aspects such as specialist skills, discretion, sense of responsibility and, in particular, independence (cf. ethical requirements).

 

prospective information

See “information (prospective)”

 

R

reasonable assurance

Overall objective of an audit of financial statements (in contrast to a review, where the objective is to obtain limited assurance). Refers to the judgement of the auditor regarding the reliability of assertions (level of (audit) assurance).

The objective of a reasonable assurance engagement is a reduction in assurance engagement risk to an acceptably low level in the circumstances of the engagement as the basis for a positive form of expression of the practitioner’s conclusion.

The synonym “positive assurance” is also used.

 

related services

Related services differ from assurance engagements. They include reviews, agreed-upon procedures, compilations and other services.

 

review

If the financial statements are the subject of an engagement to obtain limited assurance, the engagement is a review. Other historical financial information that is not in the form of financial statements may also be subject to an engagement to obtain limited assurance. PS 910 “Review of financial statements” must be observed for these engagements.

The objective of reviews of financial statements is to enable auditors to state whether they have encountered any facts that lead them to conclude that the financial statements do not comply with the applicable financial reporting standards in all material respects. This statement is made by the auditor on the basis of procedures that do not provide all the evidence that would be required of an audit of financial statements (review procedures). It is therefore worded negatively. A review provides a lower level of assurance that the information reviewed does not contain material misstatements.

For a large number of companies (e.g. those in the legal form of an AG (Aktiengesellschaft – public limited company), an audit of financial statements is required by law. Review engagements therefore primarily relate to interim financial statements or financial information for special reasons and, for example, voluntary audits of financial statements of associations on a contractual basis.

 

S

scope of audit

The scope of the audit is the information on which the audit is based.

 

significant transactions

Significant transactions are transactions in the life cycle of a company (e.g. foundation, capital increase, merger, liquidation), for which audits may be required by law. If the audit involves the examination of financial statements or other historical financial information with the aim of obtaining reasonable assurance, the audit must be conducted taking into account the circumstances of the engagement in question and the requirements of the Swiss Standards on Auditing for the audit of financial statements, unless otherwise required by law or other legal provisions.

 

special audits (statutory)

Statutory special audits and verifications of significant transactions in the life cycle of a company (e.g. foundation, capital increase, merger, liquidation), for which audits may be required by law. If the audit involves the examination of financial statements or other historical financial information with the aim of obtaining reasonable assurance, the audit must be conducted taking into account the circumstances of the engagement in question and the requirements of the Swiss Standards on Auditing for the audit of financial statements, unless otherwise required by law or other legal provisions.

 

special verification

In accordance with Art. 697A SCO, any shareholder may request the general meeting to have specific matters clarified by means of a special verification, where this is necessary for the proper exercise of shareholders’ rights and he/she has already exercised his/her right to information and inspection.

 

Swiss Audit Notices

The Swiss Audit Notices (PH) explain EXPERTsuisse’s position on specific audit issues, generally as a supplement to the Swiss Standards on Auditing. The former provide guidance to practitioners and therefore do not have the same degree of binding force as the latter.

 

Swiss Standard on Limited Audits

The Swiss Standard on Limited Audits contains principles and explanations on the professional duties of the auditor in a limited audit of financial statements and on the form and content of the report that the auditor submits in connection with the limited audit.

 

Swiss Standards on Auditing

The Swiss Standards on Auditing contain guidelines and supplementary instructions that practitioners must observe when performing assurance engagements or related services. This applies regardless of whether practitioners are acting in a statutory capacity, e.g. as a statutory auditor, or on the basis of an agreement under contract law. The mandate-related standards are divided into standards for audits of financial statements and other historical financial information, standards for other assurance engagements and standards for related services.

 

V

validation

establishment of validity