The Role of an Auditor in stock corporation and LLC
The auditor is an independent supervisory body operating in stock corporations (stock corporation) and limited liability companies (LLC). Its main task is to audit the annual financial statements in accordance with statutory requirements.
Core Tasks of the Auditor:
Auditing the accounting for legality
Control of the annual financial statements
Preparation of the audit report
Reporting violations of the law
Distinction Between Audit Types
There are two types of audits: the ordinary audit and the limited audit.
Ordinary Audit
The ordinary audit is not mandatory for all companies in Switzerland. However, the company is obliged to do so under the following circumstances:
It is a public company
Two of the following thresholds were exceeded in two consecutive financial years : (1) Balance sheet total: CHF 20 million (2) Sales revenue: CHF 40 million or (3) 250 full-time positions on an annual average
Companies that have an obligation to prepare consolidated financial statements
The ordinary audit involves a comprehensive audit of the account books, detailed reporting and higher requirements for the qualification of the auditors apply.
Limited Audit
The limited audit is the standard for small and medium-sized enterprises in Switzerland. In this type of audit, less extensive audit procedures are carried out, whereby the focus is mainly on significant business transactions and reporting is done in a reduced form. The depth of the audit is less than in the case of an ordinary audit, which better meets the needs of smaller companies. The auditor mainly conducts inquiries, analytical review procedures and appropriate detailed tests.
This form of audit offers a balanced relationship between control effort and security. The requirements for the qualification of the auditors are also less strict than for the ordinary audit, which has a positive effect on the costs for the companies. Despite the reduced scope, the limited audit nevertheless ensures an adequate review of the account books and provides stakeholders with basic assurance regarding the correctness of the annual financial statements.
Opting Out for SMEs: Prerequisites and Procedures
Opting out refers to the voluntary waiver by an stock corporation or LLC of the limited audit in accordance with Article 727a of the Code of Obligations. This option allows SMEs to exempt themselves from the statutory audit obligation, which means that no limited audit has to be carried out.
Basic Prerequisites for Opting Out
An opting out is possible if the following criteria are met:
Less than 10 full-time positions on an annual average
Consent of all shareholders or partners
No statutory obligation for an ordinary audit
Practical Implementation of Opting Out
Upon Incorporation
Within the framework of a company foundation, the founders can waive an auditor right from the start. This waiver must be explicitly stated in the public deed of incorporation. In this case, it is required that all founders agree to this waiver. The declaration is then included directly in the incorporation documents and submitted to the commercial register.
Depending on the canton, there are different formal requirements. Some cantons require a separate opting-out declaration in addition to the deed of incorporation. This declaration confirms once again in writing that the company meets the statutory requirements for waiving the audit and that all parties involved agree to this.
It is therefore advisable to clarify the specific cantonal requirements before the foundation or to ask an expert in order to make the foundation process run smoothly and avoid unnecessary delays.
In the Case of an Existing Company
Existing companies must register the opting out with the commercial registry office, signed by the authorized representatives. The general meeting must decide this by a majority. The cantonal requirements differ. Most cantons require an opting-out declaration signed by all partners or the board of directors. A prior review of the specific cantonal requirements is recommended to avoid delays.
Legal Consequences
After successful opting out:
No external audit of the annual financial statements
Possibility of reintroducing an audit at any time
The company must meet the requirements for opting out permanently. If the thresholds are exceeded, an immediate adjustment is required.
Advantages of Opting Out for SMEs
Opting out offers SMEs significant economic benefits:
Direct Cost Savings
The elimination of annual auditing costs, which usually range between CHF 2'000 and 5'000, represents a signficant financial advantage. In addition, companies benefit from a significant reduction in administrative effort, as time-consuming preparation of documents for external auditors is no longer required.
Increased Freedom of Action
Decision-making is significantly accelerated by the elimination of external audit bodies, while at the same time internal processes are simplified. This enables companies to focus more on their core business and to use their resources more purposefully.
Reduced Administrative Burden
The reduced administrative burden is particularly evident in the simplified documentation obligations and a leaner organizational structure. Companies can thus use their existing resources much more efficiently and concentrate on essential business processes. This leads to an optimized way of working and enables a more flexible adaptation to changing market conditions.
Conclusion
Opting out represents a sensible option for many SMEs to optimize their operational processes and reduce costs. The possibility of waiving an auditor not only offers financial benefits, but also enables a leaner organizational structure and greater entrepreneurial flexibility. However, companies should carefully weigh the decision to opt out and ensure that they meet the statutory requirements. An effective internal control system remains of great importance for sustainable corporate governance even without an external audit.
These advantages enable SMEs to make their business activities more agile and cost-efficient. The saved resources can be invested directly in corporate development. Jurata will be pleased to assist you with all questions and concerns regarding opting-out during incorporation or for already registered companies.
