Switzerland’s federal audit authority has warned about weaknesses in the auditing of the country’s pension funds.
It called for pension fund auditors to be placed under its supervision, or to be required to have a special licence.
In contrast to the auditors of financial market institutions like banks, pension fund auditors were not subject to ongoing supervision and there were no periodic reviews of the quality of audit services, the Federal Audit Oversight Authority (FAOA) said in its annual report.
The FAOA said it could only review audit services where there were grounds for concern, such as in the context of liability proceedings against individuals.
However, in such cases it would time and again identify “serious violations” against duty of care, it said. In most cases its intervention was too late and the damage had often already been done.
The federal body questioned whether the legal requirements for auditors of pension funds were sufficiently high.
Independent oversight was the only way to raise the quality of auditing on a lasting basis, according to the FAOA.
The quality of pension fund auditing has been an issue in Switzerland for some time.
In 2015, OAK BV, the federal pensions regulator, carried out a comprehensive survey of the quality of audit reports and found a high error rate.
In 2016 it issued instructions to improve auditing, including a requirement that lead auditors had at least 50 billable hours of practical auditing experience in occupational pensions per calendar year. In its annual report the FAOA said this guidance went in the right direction, but that the requirements needed to be defined at the level of the law.
The Swiss government is currently exploring whether the legal framework for auditing needs to be amended, including considering the need for an ongoing oversight and special licensing regime for pension fund auditors.