Assurance

The assurance market is mature and intensely competitive. This obviously limits the scope for organic growth. The restrictions imposed by competition law mean that mergers and acquisitions are scarcely feasible, particularly since various important institutions, including the EU Commission, believe that the market is already too concentrated. Clearly, it is our ambition to win new audit mandates. Our quest for these is aimed at large, quoted companies and the SME segment alike. We are also keen to ensure that our existing clients derive true value from our audits.

The best strategy, not only for maintaining or developing client relationships but also for winning new mandates, is to be uncompromising in maintaining audit and service quality at a consistently high level. This strategy is paying off. Last year, we managed to win some very attractive mandates, both among quoted and unquoted companies. However the best proof that our quality-based strategy is working is that we succeeded in retaining virtually all our mandates which were put out to tender last year.

We believe there is significant potential in audit-related services. These include risk assurance services, the management and optimisation of IT systems – with regard to risks, controls and security – and of other operational processes and controls. We have identified substantial demand for advisory work in this area. We are finding, for example, that many companies, having set up internal control systems, now face the challenge of merging, streamlining and automating their financial and operational controls. Accounting and financial reporting services are another audit-related growth area. Here we are able to assist clients wishing to adapt their financial reporting to a new set of rules, be it Swiss GAAP FER, IFRS or US GAAP. Beyond that, we have for many years also been offering internal audit services on a cosourcing or outsourcing basis. This is an area where we can provide clients with very efficient and cost-effective solutions.

A clear advantage for our audit clients is that we already know their organisation well. That enables us to build on our existing knowledge with relatively little effort, thus creating a high quality of service at comparatively low cost. There is a need for caution here, however. In order to maintain our independence as auditors, there are some services we do not offer to our audit clients at all, or to a very limited extent only. This applies, for example, to cases where we assist a company’s management in setting up new IT systems. This is a service which we reserve exclusively for our non-audit clients.

It is absolutely indispensable. Since the Sarbanes-Oxley Act came into force in the US about ten years ago, regulatory efforts worldwide have been focused on improving the quality of audits. Regulators are required to assess audit quality. They do that by examining audit firms’ organisation and processes and by looking at how they carry out individual mandates. An examination of this kind was recently carried out here at PwC Switzerland. The Swiss Federal Audit Oversight Authority, the FAOA, conducted a joint inspection with the US Public Company Accounting Oversight Board, the PCAOB. This exercise, the first of its kind in Switzerland, involved examining the quality of our firm as a whole and the quality of our work on specific mandates. The results have not yet been published.

Competitive pressure is one thing. There are also the regulators’ various formal requirements, and these increase the audit workload. The result is that our auditors are now working at least as many hours on an audit, if not indeed more, but that this is not reflected in our fee volumes. That obviously puts margins under pressure. We are however steadfast in our attitude on one point. We will never sacrifice the quality of our services or our audits. Any compromise there would not only jeopardise our long-term success, it would also threaten our professional ethical standards. There will be no compromises here – be it with regard to the mandates we accept or the quality of the services we offer. For us, quality is the basis of our future success.

Raising efficiency is indeed the best way of protecting our margins. We have done a lot of work in this area. Last year we implemented AURA, our new audit software, for practically all our mandates. That represented a big investment, but it is one which will more than pay its way. AURA is one component of our Audit Transformation Programme. We have also started centralising certain formal tasks in the audit process. For one year now, we have been running a Service Delivery Centre in Bern, where a specialised team carry out certain administrative audit tasks. This standardisation not only reduces costs, it also ensures consistently high quality levels.

Definitely. I am convinced that by engaging in regular dialogue with their auditor, a company’s managers are able to identify opportunities and risks more accurately and to act faster. The company can put the auditor’s experience to good use in improving the quality of its internal processes and financial statements. The essentially critical attitude of an auditor and his or her persistent line of questioning are something from which companies can only profit.