The statutory audit has a reputation for disruption that is largely self-inflicted. Finance teams that treat the audit as an annual surprise, assembling documentation under pressure once the auditors have arrived and started asking questions, will have a painful experience every year. Finance teams that treat the audit as a predictable process requiring predictable preparation will find it manageable and, in some years, nearly frictionless.
The difference is preparation, and most of the preparation happens during the year, not in the week before the auditors arrive.
This article covers the controller’s role in audit preparation: what to have ready, how to organise the documentation, and what the common findings are and how to avoid them.
What the Statutory Audit Is Examining
Under Swiss law, the statutory audit (Revision) is conducted under the requirements of the Obligationenrecht (OR), specifically articles 727 to 731a. The scope depends on the size of the company.
Companies above two of three thresholds (CHF 20M balance sheet total, CHF 40M net revenue, 250 full-time employees) are subject to an ordinary audit (ordentliche Revision) conducted by a licensed audit firm (Revisionsunternehmen). Smaller companies are generally subject to a limited audit (eingeschränkte Revision), which is a less intensive process.
The ordinary audit examines whether the financial statements give a true and fair view of the financial position in accordance with the applicable accounting standards, and whether the statutory provisions and articles of association have been followed. The limited audit provides only limited assurance: the auditor confirms that nothing has come to their attention that would suggest the accounts are not properly prepared.
Regardless of the scope, both types of audit generate findings and adjusting entries when the underlying records are not in order. Minimising those findings is primarily a function of the quality of the accounting records and the organisation of the supporting documentation.
The Year-Round Preparation Mindset
Audit preparation done well is not a separate activity from the normal finance function. It is a discipline embedded in the monthly close process.
Every reconciliation performed at month-end is audit preparation. Every accrual posted with clear documentation of the basis is audit preparation. Every balance sheet account that is reviewed and explained at month-end is audit preparation. The audit does not require new work if the monthly close is done properly. It requires making the work that has already been done visible and accessible.
The practical implication: design the monthly close process with the audit in mind. Balance sheet reconciliations should be prepared in a format that an auditor can review without explanation: account name, period, opening balance, movements in period with brief descriptions, closing balance, and a reference to the supporting evidence. If the reconciliation makes sense to a competent reviewer who was not involved in preparing it, it is audit-ready.
The Pre-Audit Checklist
Four to six weeks before the audit begins, run through the following review. Each item represents either a common audit finding or a source of audit delay when not addressed in advance.
Balance sheet reconciliations. Every balance sheet account should have a current reconciliation with supporting evidence. Cash accounts reconciled to bank statements. Receivables reconciled to the subledger aged analysis. Fixed assets reconciled to the asset register with depreciation calculations. Payables reconciled to the subledger and to supplier statements for significant balances. Accruals with documentation of the basis for each provision. Prepayments identified and confirmed as still valid.
Intercompany balances. If the company has transactions with related parties or group entities, the intercompany balances need to be agreed and reconciled between both sides before the audit. Unreconciled intercompany balances are one of the most common causes of audit delay and adjusting entries.
Fixed asset register. Verify that the asset register is complete and current: all assets physically in use are on the register, all disposals during the year have been removed, all new additions are recorded at the correct capitalisation date, and the depreciation rates applied are consistent with accounting policy.
Accruals and provisions review. Review every provision and accrual on the balance sheet. Is the underlying obligation still valid? Is the amount still a reasonable estimate? Are there any obligations that have been incurred during the year but not accrued? Auditors will challenge any provision that lacks a documented basis for the amount.
Revenue completeness check. For businesses with complex revenue recognition, confirm that all revenue recognised in the year meets the applicable recognition criteria and that deferred revenue is correctly calculated and presented.
Related party transactions. Prepare a schedule of all transactions with related parties (shareholders, directors, connected entities) for the year. Include the nature of the transaction, the amount, and confirmation that it was conducted at arm’s length. This schedule is a standard audit request and should be ready before the auditors ask for it.
Tax calculations. Prepare the income tax calculation and confirm that the current and deferred tax provisions are correctly calculated. MWST: confirm that all quarterly filings match the accounting records and that any reconciling items have been investigated.
What to Have Ready on Day One
When the audit team arrives, having the following organised and accessible reduces the first week from a documentation chase to actual audit work.
A document index: a structured list of all the key documents and where they are located, organised by balance sheet line item and P&L category. An audit team that can navigate to the supporting documentation without asking produces results faster and with less disruption.
The prior year audit file for reference: the prior year’s adjusting entries, the significant accounting judgments, and the auditor’s management letter points. Each prior year finding should have been addressed during the year, and the controller should be able to demonstrate how.
The accounting policies document: a written description of the key accounting judgments and estimates used in preparing the accounts. Revenue recognition policy, depreciation methods and rates, inventory valuation methodology, basis for major provisions. Having this written down, rather than relying on verbal explanation, saves significant audit time.
Common Audit Findings and How to Avoid Them
Unreconciled balance sheet accounts. The fix is the year-round reconciliation discipline described above. An account that has been reconciled every month will not generate a finding at year-end.
Accruals without documented basis. Every accrual should have a file note or calculation that a reviewer can follow. “Provision based on management estimate” is not a documented basis. “Provision of CHF 45K based on the estimated cost of completing the Zürich project, calculated as estimated remaining hours multiplied by the applicable daily rate, per the project manager’s assessment dated 31 December” is a documented basis.
Capitalised costs that should have been expensed. The boundary between capital expenditure and operating expenditure is a frequent audit focus area. The accounting policy for capitalisation should be documented and applied consistently. Any judgment calls at the boundary should be documented at the time they are made.
Cut-off errors. Revenue or costs recognised in the wrong period. The month-end cut-off discipline from the close checklist in article 1 of this series is the preventive control.
Missing disclosure. Swiss OR and, for larger companies, Swiss GAAP FER or IFRS require specific disclosures that are easy to overlook if nobody is maintaining a disclosure checklist. Common missed disclosures: related party transaction details, contingent liabilities, post-balance-sheet events, and significant accounting estimates.
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Alessandro Ratzenberger is a fractional CFO and business controller based in Zurich, with 15 years of operational finance experience at Dufry Group and Bomi (UPS Group).
