Financial Institution Compliance Audits in Switzerland: A Thorough Inspection

Audit firms play a vital role in ensuring that Swiss banks and securities firms comply with regulatory requirements. They conduct thorough assessments of these institutions’ risk situations, taking into account both qualitative and quantitative factors.

The Audit Process

Within four months after the financial year ends, audit firms submit their assessment of the risk situation to FINMA (Swiss Financial Market Supervisory Authority) on a standard form. This comprehensive analysis covers all areas of auditing, determining the net risk exposure by combining various risk factors.

Audit Strategy Matched to Risk Analysis

For supervised institutions in FINMA’s Supervisory Categories 3 to 5, a standardized audit strategy is applied based on their net risk exposure. The frequency and depth of the audit are determined by this assessment. For institutions in Supervisory Categories 1 and 2, however, FINMA exercises greater influence over the audit fields, defining the audit strategy through dialogue with the audit firm.

On-Site Audits

Audit firms implement these strategies on-site at the premises of the supervised institution. In some cases, institutions with no heightened risk situation and without significant weaknesses can apply to have their audit frequency reduced. If approved by FINMA, these institutions may only undergo regulatory on-site audits every two or three years.

Reporting

Audit firms submit their findings in a standardized report to FINMA, which includes:

• General information about the audit procedure
• Statements of auditors’ independence
• Details about the development of each institution’s business activity and organization
• Commentary on any irregularities discovered or recommendations for improvement

Special Circumstances: Audit Mandataries

In specific circumstances, FINMA may appoint an audit mandatary, which can be another authorized audit firm or independent third party with the necessary experience and expertise.

Compliance Audits for Institutions Seeking Authorization

The selection of an audit firm is done via the FINMA Survey and Application Platform (EHP). Institutions without access to EHP can use a separate form.