What is Internal audit?
Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It involves evaluating and improving the effectiveness of risk management, control, and governance processes. In Switzerland, internal auditing is an essential function for companies, particularly those in regulated industries or public sectors, as it helps ensure compliance, efficiency, and the safeguarding of assets.
Key Features of Internal Audit
- Risk Management: Internal auditors assess the organization’s risk management processes to ensure that potential risks are identified, evaluated, and managed effectively. This helps mitigate financial, operational, and compliance risks that could negatively impact the organization.
- Control Evaluation: Internal audits evaluate the effectiveness of internal controls, which include policies, procedures, and practices designed to ensure accurate financial reporting, prevent fraud, and ensure operational efficiency. A strong internal control system helps protect the organization’s assets and supports its long-term sustainability.
- Compliance and Governance: Internal auditors assess the company’s adherence to regulatory requirements, laws, and internal policies. They also evaluate the company’s governance framework, ensuring that the board and management are fulfilling their roles and responsibilities appropriately.
- Consultative Role: While traditional internal audits focus on reviewing existing controls, modern internal auditors also serve a consultative role, advising management on process improvements and supporting strategic decision-making to enhance business performance.
Internal Audit in Switzerland
In Switzerland, internal auditing is regulated by both local laws and international standards, such as the Institute of Internal Auditors (IIA) Standards. Swiss companies, especially those listed on the SIX Swiss Exchange or in regulated industries such as banking or insurance, are required to implement internal audit functions to meet compliance and governance standards.
- Regulatory Framework: Swiss companies must adhere to the Swiss Code of Obligations, which outlines the requirements for financial reporting, auditing, and governance. Public companies are also subject to the regulations of the Swiss Financial Market Supervisory Authority (FINMA), which requires effective internal audit systems to ensure transparency and reduce risks in financial reporting and operations.
- Corporate Governance: The role of internal audit in Switzerland is an integral part of corporate governance. It ensures that the company operates ethically, efficiently, and in compliance with both Swiss law and international best practices. The Swiss Corporate Governance Code encourages companies to establish an effective internal audit function that reports directly to the board of directors or the audit committee.
- Independence and Objectivity: Internal auditors in Switzerland must maintain independence from the activities they audit. They should not be involved in day-to-day operations, and their findings should be objective and unbiased. This independence is critical for ensuring the reliability and effectiveness of the internal audit process.
Internal auditing in Switzerland plays a vital role in supporting business integrity, risk management, and regulatory compliance. By conducting independent assessments and offering valuable insights, internal auditors help organizations improve their operations, enhance governance, and mitigate risks, ensuring sustainable business practices and fostering stakeholder confidence.