Adjustment of audit oversight of foreign companies

The National Council and the Council of States have decided to adjust the responsibilities of the Federal Audit Oversight Authority (FAOA) regarding the supervision of foreign audit firms. This resulted in a reduction of responsibility, which however, is not intended to impact investor protection.

To ensure the protection of investors on the Swiss capital market, the effect of the Audit Supervision Law extends abroad. Therefore, the Federal Audit Oversight Authority supervises not only domestic audit firms. Foreign audit firms are also subject to the FAOA if they audit foreign companies that issue equity securities or bonds on the local capital market.

However, there are two exceptions to this regulation. The first is if the foreign audit firm is subject to a foreign audit oversight authority that has been recognized by the Federal Council. The second is if the bond obligations being issued are guaranteed by a company whose auditing body is also subject to a recognized foreign audit oversight authority.

Recently, the jurisdiction of the FAOA has been further reduced. The parliament and the Federal Council decided to make some adjustments. The most important is that the jurisdiction of the FAOA will henceforth only extend to listed bond obligations. For non-listed bonds, the FAOA is no longer responsible.

Investor protection is still to be ensured. This is especially through the duty of disclosure. Investors must be informed in every case that the audit body is not under state supervision. Furthermore, the Federal Council, at the request of the FAOA, recognized 16 additional foreign authorities as equivalent to Switzerland. In total, 48 foreign supervisory authorities are now classified as equivalent to the FAOA. The changes took effect on October 1, 2017. More information can be found here.

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