Do I need an auditor as a small business?

In principle, yes, because anyone who does not meet the size criteria for a regular audit (20-40-250 rule) is obliged to have a so-called limited audit carried out.

However, the legislature has introduced an instrument called "opting out," which allows companies to forgo an auditor entirely, provided all shareholders/partners agree and the company has no more than 10 full-time employees on average per year. We will explain how this opting out works here and also address some special cases.

How does opting out work?

For a company to be able to opt out, all shareholders/partners must waive limited auditing, and the company may not have more than 10 full-time positions on average per year. The waiver of limited auditing must be approved by all shareholders/partners and registered in the commercial register. Furthermore, the articles of association must provide for the option of opting out. The commercial registry office therefore examines the admissibility of opting out upon registration but does not conduct detailed reviews; instead, it relies on the declaration of the board of directors/partners.

The new accounting law deliberately added a new requirement requiring a statement in the notes to the annual financial statements stating whether the average number of full-time positions did not exceed 10. However, the text of the law did not explain in detail how these 10 full-time positions are to be calculated. Should apprentices and trainees, for example, be included in the calculation, even though, from a purely economic perspective, they tend to have low productivity and frequent absences? Should temporary workers be attributed to the temporary employment agency or rather to the client company?

In general, the prevailing opinion among academics is that the employment contract relationship is the determining factor. Employees are assigned to the company with which they have an employment contract, and which also accounts for the relevant social security benefits in the individual case. Apprentices and trainees have an employment contract according to the Swiss Code of Obligations and are therefore included. Of course, the workload and absences (school) should be taken into account (calculating full-time positions). Temporary workers are assigned to the temporary employment agency, as the employment contract is with them. However, it should be noted that there is no uniform practice among the various cantonal commercial registers. Therefore, the relevant information sheets of the responsible commercial register office must be consulted in each specific case.

Once opted out, it remains valid for subsequent fiscal years. What happens if the company grows and it is determined during the current fiscal year that the 10 full-time positions are exceeded?

It is now the responsibility of the board of directors or shareholders to promptly arrange for the appointment of an auditor. If the board of directors or shareholders fail to act or act too late, the annual financial statements will not be properly audited. This is then considered a deficiency in the organization, and the board of directors or shareholders are liable for any damages resulting from this breach of duty.

However, the actual number of employees is neither verified upon registration for opting out, nor are there any subsequent checks to determine whether the limit has been exceeded. In fact, the legislature relies on truthful information provided by the board of directors/shareholders and relies on the deterrent effect of liability lawsuits should organizational deficiencies subsequently emerge.

The board of directors and shareholders are well advised to review the number of employees periodically (e.g., every mid-year). If an expansion with a corresponding increase in the number of employees beyond 10 full-time positions is planned, the topic of auditors should be included on the agenda. The current fiscal year is decisive, i.e., by the time the annual report is available, it is already far too late to appoint an auditor.