Swiss Audit Requirements: Ordinary, Limited and Opting-Out

Every Swiss company registered in the commercial register is subject to audit requirements. The scope of the audit — ordinary, limited or none — depends on the company’s size, structure and stakeholder profile. Understanding which category applies to your business determines annual compliance costs, reporting obligations and the level of scrutiny your financial statements receive.

The Three Audit Categories

Swiss company law (Code of Obligations, Arts. 727–731a) establishes three distinct audit regimes:

Ordinary Audit

An ordinary audit is required if the company exceeds two of the following three thresholds in two consecutive financial years:

An ordinary audit is also mandatory for:

• Companies that are required to prepare consolidated financial statements
• Companies listed on a stock exchange (SIX Swiss Exchange)
• Companies where a shareholder or group of shareholders representing at least 10% of share capital requests it
• Foundation and association subject to oversight

Scope of ordinary audit:

• Full audit per Swiss Auditing Standards (SAS) or, for listed companies, International Standards on Auditing (ISA)
• Auditor provides an opinion on whether the financial statements give a true and fair view
• Auditor verifies compliance with law and articles of association
• Auditor confirms the existence of an internal control system
• Auditor reports to the general meeting (Generalversammlung) with a written audit report

Limited Audit (Review)

Companies that do not meet the ordinary audit thresholds are subject to a limited audit (eingeschränkte Revision), unless they opt out.

Scope of limited audit:

• Review engagement based on Swiss Standard on Review Engagements (SRE)
• Auditor performs analytical procedures and enquiries of management
• Less extensive than an ordinary audit — no detailed testing of transactions
• Auditor provides a conclusion stating whether anything has come to their attention causing them to believe the financial statements are not prepared in accordance with the law
• Auditor verifies that the proposed appropriation of profit complies with the law and articles
• No assessment of internal control system required

Opting Out of Audit

Companies with fewer than 10 full-time equivalents (FTEs) may opt out of the audit entirely if:

1. All shareholders unanimously consent to the opt-out (Art. 727a(2) OR)
2. The consent is documented in a written declaration (typically included in the minutes of the general meeting)
3. The opt-out is filed with the commercial register

Important limitations:

• The opt-out applies to the limited audit only — if the company triggers ordinary audit thresholds, it cannot opt out
• Any single shareholder can revoke the opt-out and demand an audit at any time
• The opt-out must be renewed if shareholders change (new shareholders must consent)
• Even with an opt-out, the board of directors remains responsible for proper bookkeeping and financial reporting

Selecting an Auditor

Eligibility

The auditor must be:

• For ordinary audit: A state-supervised audit firm (licensed by the Federal Audit Oversight Authority, FAOA/RAB) and the responsible lead auditor must hold a Swiss federal diploma in auditing (eidg. dipl. Wirtschaftsprüfer)
• For limited audit: A licensed auditor (zugelassener Revisor) or audit expert; the firm must be registered with FAOA/RAB

Independence

The auditor must be independent of the company. Key independence rules:

• The auditor (firm and individual) may not be a member of the board, an employee or a shareholder of the company
• The auditor may not perform bookkeeping or other services that compromise objectivity
• The auditor must rotate after a maximum of 7 consecutive years as lead auditor (ordinary audit only)

Appointment

The auditor is appointed by the general meeting (shareholders’ meeting) for a term of one to three financial years. The appointment is registered in the commercial register.

Cost

For a newly formed GmbH or small AG with straightforward operations, a limited audit typically costs CHF 3,000–8,000 per year. The opt-out saves this cost entirely but removes an external check on financial reporting quality.

Annual Financial Reporting

Regardless of the audit category, every Swiss company must prepare annual financial statements comprising:

1. Balance sheet (Bilanz) — assets and liabilities at year-end
2. Profit and loss statement (Erfolgsrechnung) — income and expenses for the financial year
3. Notes to the financial statements (Anhang) — supplementary disclosures required by law

Accounting Standards

Approval and Filing

1. The board of directors prepares the financial statements within six months of the financial year-end (Art. 958(3) OR)
2. Financial statements are submitted to the auditor (if applicable)
3. The auditor issues a report within a reasonable timeframe
4. The general meeting approves the financial statements and the proposed appropriation of profit
5. The tax return, incorporating the approved financial statements, is filed with the cantonal tax authority — see annual filing requirements

Board Responsibilities

Even for companies that opt out of audit, the board of directors has non-delegable duties regarding financial reporting:

• Proper bookkeeping — the board must ensure the company maintains orderly books and records (Art. 716a(1)(3) OR)
• Financial control — the board must monitor the financial position of the company
• Going concern assessment — the board must act if there are reasonable grounds to believe the company is over-indebted (liabilities exceed assets)
• Capital loss notification — if the company’s most recent annual financial statements show that half the share capital and legal reserves are no longer covered by assets, the board must convene a general meeting and propose remedial measures (Art. 725 OR)
• Over-indebtedness notification — if the company is over-indebted, the board must notify the court unless creditors agree to subordinate their claims to an extent that resolves the over-indebtedness (Art. 725b OR)

These duties apply regardless of whether the company is audited. In practice, the absence of an auditor places greater responsibility on the board to ensure financial reporting accuracy — a consideration that may influence the opt-out decision.

Choosing Between Limited Audit and Opt-Out

Recommendation: For companies seeking bank financing, external investment or international business relationships, retaining at least a limited audit provides external credibility that typically outweighs the modest cost. For purely owner-managed companies with no external stakeholders, the opt-out is a practical cost saving.

Common Compliance Issues

1. Late financial statement preparation — the 6-month deadline from year-end is frequently missed by SMEs, potentially triggering commercial register sanctions
2. Incorrect opt-out procedure — the opt-out requires unanimous shareholder consent, documented in writing. A majority vote is insufficient
3. Failure to update the commercial register — changes to the auditor must be registered. Operating with an unregistered auditor violates filing requirements
4. Inadequate bookkeeping — even opt-out companies must maintain books that comply with OR accounting standards. Tax authorities may impose penalties for inadequate records
5. Crossing audit thresholds — companies growing past the ordinary audit thresholds must transition to an ordinary audit. The transition requires appointing a state-supervised audit firm and may necessitate restating prior-year financials under a more rigorous standard
6. Ignoring transfer pricing documentation — audit firms increasingly review intercompany transactions; inadequate documentation creates audit findings

Timeline

Understanding your audit obligations early — ideally during company formation — allows you to budget accurately, select the right auditor and structure your financial reporting processes from the outset.

Donovan Vanderbilt is a contributing editor at ZUG BUSINESS, the institutional intelligence publication of The Vanderbilt Portfolio AG, Zurich. His coverage spans Swiss corporate governance, financial reporting regulation and compliance for international businesses.