Czech Republic

As a member of the European Union (EU), the Czech Republic is subject to the accounting, auditing and financial reporting requirements established in EU Regulations and Directives as transposed into national laws and regulations. The World Bank reports in its 2013 Report on the Observance of Standards and Codes on Accounting and Auditing (ROSC) that the Czech Republic has fully aligned its legal framework with the EU acquis communitaire in accounting and auditing.

Accounting Framework

The Accounting Act of 1991 as amended in 2021 stipulates the requirements for the preparation of financial statements, including applicable accounting standards and financial reporting thresholds. In accordance with the law, the Ministry of Finance is responsible for enacting financial reporting standards in the Czech Republic.

EU-endorsed IFRS are required for the preparation of separate and consolidated financial statements of all listed companies on an EU regulated market. Other entities have the option to prepare their consolidated financial statements in accordance with IFRS. If those companies decide to do so, all consolidated entities can use IFRS as a basis for preparation of their stand-alone financial statements.

Companies are also required to keep accounting records in accordance with Czech GAAP for tax purposes or reconcile their IFRS financial statements to Czech GAAP. Czech GAAP are bookkeeping instructions needed to account for a specific transaction. Detailed accounting guidance for other entities is given in the Decrees on Accounting and Czech Accounting Standards, issued by the Ministry of Finance.

IFRS for Small and Medium Enterprises are not adopted in the jurisdiction.

Auditing Framework

The Czech parliament passed amendments to the Act on Auditors on August 25, 2016 to transpose the EU Directive 2014/56/EU on statutory audits of annual accounts and consolidated accounts and Regulation (EU) No 537/2014 on specific requirements regarding statutory audit of public interest entities. The amendments define the scope of entities subject to mandatory audit requirements and establish the Public Audit Oversight Board (PAOB). Under the amended Act, public interest entities in the Czech Republic are defined as listed companies on an EU regulated market, credit institutions, insurance undertakings, pension companies, and health insurance companies.

Under the Act, all large and medium-sized entities meet at least one of the basic criteria in two subsequent accounting periods: (i) turnover of CZK 80 million; (ii) net assets of CZK 40 million; and (iii) average number of employees is 50. Other small entities that meet at least two of the audit criteria listed above are also subject to mandatory audits, while micro entities are not.

Mandatory membership in the Chamber of Auditors of the Czech Republic (CACR) is required of all statutory auditors and audit firms. Audits must be conducted in accordance with ISA as promulgated by CACR and approved by the PAOB. CACR has an ongoing process to adopt the current version of the ISA as issued by the IAASB.

Only auditors are regulated at the state level under the Act on Auditors of 2009 as amended in 2022. The law outlines the roles of the Public Audit Oversight Board (PAOB) and Chamber of Auditors of the Czech Republic (CACR) — the audit oversight entity and the professional accountancy organization; establishes initial and continuing professional development requirements (IPD and CPD); applicable auditing and ethical standards; and stipulates the creation of a quality assurance (QA) review system and investigative and disciplinary (I&D) measures for auditors.

To practice as an auditor, an individual must obtain a license from CACR. To obtain an audit license from CACR, candidates must (i) hold a bachelor or master’s degree recognized in an EU Member State; (ii) have legal capacity and demonstrated integrity; (iii) complete three years’ work experience in auditing; and (iv) pass the professional exams organized by CACR. Within 30 days of the date of providing evidence of compliance with all requirements pursuant to subsections 4(a) to (g) of the Act, CACR can allow applicants to take the auditors’ oath. CACR can issue an Auditor’s License upon request from a commercial company. The law also provides for the acknowledgement of foreign qualifications and authorizes CACR to recognize professional qualifications that were obtained abroad for individuals who wish to practice in the Czech Republic.

To maintain an audit license, statutory auditors must remain members of CACR and adhere to its rules and regulations that it develops under the oversight of PAOB — the audit oversight authority. The CACR’s responsibilities include: (i) issuing licenses to practice auditing; (ii) maintaining registries of auditors and registries of revoked licenses; (iii) organizing and conducting examinations for auditors; (iv) developing and delivering CPD activities; (v) setting and enforcing compliance with applicable auditing and ethical standards as well as CPD requirements; (vi) initiating I&D procedures for members; (vii) carrying out QA reviews of its members; and (viii) undertaking any other activities that promote high professional standards and improve the quality of auditing services.

Under the Act, the PAOB oversees all the above-mentioned operations of CACR. Specifically, it is responsible for (i) acting as the appeals body to CACR decisions, including any unresolved quality control or disciplinary issues; (ii) supervising the adoption and observance of international audit standards; (iii) supervising the adoption and observance of the code of ethics; (iv) supervising the observance of the internal regulations of CACR; (v) supervising CACR’s CPD program for auditors; and (vii) conducting QA reviews and I&D processes for auditors of public interest entities.

Other accounting professionals may voluntarily choose to join the Chamber of Tax Advisors of the Czech Republic (CTA) and/or the Union of Accountants of the Czech Republic (UOA) and be subject to their regulations.

The Union of Accountants, which unites accountants on a voluntary basis, offers qualifications of Certified Accountant and Accounting Expert and has established the requirements for a final assessment. To become a member of UOA, candidates must minimally have a high school diploma and at least two years practical experience (certified accountant is two years while accounting expert is three years). UOA’s membership comprises bookkeepers, accountants, auditors, and tax consultants. UOA has developed its own certification program, which is operated by the Institute for the Certification of Accountants (ICU) (a private firm). This certification program consists of 12 examinations (8 for certified accountant and an additional 4 more for accounting expert), originally designed with assistance of the Association of Chartered Certified Accountants. Professional accountants, who successfully pass all ICU exams of a two-stage certification program (certified accountant and accounting expert) or are members in good standing of a similar foreign association, may request the certificate from UOA.

CTA unites tax consultants on a voluntary basis and offers the qualification of Tax Consultant. Candidates for the tax consultant certification must obtain a university degree in line with the Tax Advisory Services and the Chamber of Tax Advisers of the Czech Republic Act of 1992 as amended in 2020 and pass the qualification test issued by the Chamber of Tax Advisors of the Czech Republic in cooperation with the Ministry of Finance. The Chamber of Tax Advisors organizes several training sessions and seminars to help candidates prepare for the qualifying exam.

The Act on Auditors of 2009 as amended in 2022 established the Public Audit Oversight Board (PAOB) as the independent public audit oversight authority.

PAOB is responsible for (i) overseeing all of Chamber of Auditors of the Czech Republic (CACR) operations as well as acting as the appeals body to CACR decisions, including any unresolved quality control or disciplinary issues; (ii) supervising the adoption and observance of international audit standards; (iii) supervising the adoption and observance of the code of ethics; (iv) supervising the observance of the internal regulations of CACR; (v) supervising CACR’s continuing professional development program for auditors; and (vi) carrying out QA reviews and investigation and disciplinary processes for auditors of public interest entities.

PAOB is a member of the International Forum of Independent Audit Regulators.

Chamber of Auditors of the Czech Republic (CACR)

CACR was founded in 1993 for the purpose of governing the audit profession in the Czech Republic. Its authority is stipulated in the Act on Auditors of 2009 as amended in 2022. Statutory auditors are required to be licensed members of CACR by law. CACR is responsible for (i) issuing licenses to practice auditing; (ii) maintaining registries of auditors and registries of revoked licenses; (iii) organizing and conducting examinations for auditors; (iv) developing and delivering continuing professional development (CPD) activities; (v) enforcing compliance with applicable auditing and ethical standards as well as CPD requirements; (vi) initiating investigation and disciplinary procedures for members; (vii) carrying out quality assurance reviews of its members; and (viii) undertaking any other activities that promote high professional standards and improve the quality of auditing services.

In addition to being a member of IFAC, CACR is a member of Accountancy Europe.

Chamber of Tax Advisers (CTA)

The CTA is an independent professional organization of tax advisers established by the Tax Advisory Services and the Chamber of Tax Advisers of the Czech Republic Act of 1992 as amended in 2020.

CTA oversees proper performance of tax advisory services, regulates activities of tax advisors, creates preconditions for improvement of their qualification, offers its members a wide range of various services, protects and promotes their rightful interests and helps to form a suitable environment for tax advisers' work. Pursuant to the Act, only those individuals who are listed on the list of the Chamber of Tax Advisers of the Czech Republic can be considered as tax advisers.

Union of Accountants (UOA)

UOA is a voluntary professional organization of professional accountants, established in 1990 by the Civic Association Act of 1990 as amended in 1993. It is the successor body to the Czech Union of Accountants and Statisticians, which was established in 1969. UOA has approximately 6,000 members as of the date of the assessment, including bookkeepers, accountants, auditors, and tax consultants.

UOA is a member of the Bonn-based European Management Accountants Association.

• A new accounting law is expected to come into force January 1, 2025. CACR has been participating in multiple working groups with the government. Among other matters, the new law will require IFRS application for more companies, including banks, insurance companies, and investment funds. It is also expected to increase the audit threshold. Adoption and implementation of the Corporate Sustainability Reporting Directive (CSRD) is also under discussion as part of the new accounting law.

The Act on Auditors of 2009 as amended in 2022 stipulates that a quality assurance (QA) review system for all audits be established and be operated Chamber of Auditors of the Czech Republic (CACR) subject to oversight by the Public Audit Oversight Board (PAOB). The PAOB carries out QA reviews of audits of PIEs at least every three years while CACR does QA reviews of non-PIEs at least every six years.

The scope of the QA program covers all audits and other assurance engagements. CACR employs staff inspectors to lead the inspections, ensuring adherence to ISQMs and other related standards, and are supported by practitioners who provide technical support. Members of the inspection department receive annual training.

The quality management standards (ISQMs) are effective as of 15 December 2022. CACR is preparing to update its QA review program as a result. All quality inspectors were trained on how the adoption of ISQM 1 and 2 may apply to QA reviews and the guidance for QA reviewers was updated.

CACR reports that the QA review system is in line with the requirements of SMO 1 and the European Union’s Directive on Statutory Audit.

Current Status: Adopted

The initial professional and continuing professional development (IPD and CPD respectively) requirements are established for auditors in the Act on Auditors of 2009 as amended in 2022 and are implemented by Chamber of Auditors of the Czech Republic (CACR) under the oversight of the Public Audit Oversight Board (PAOB) and local universities.

These requirements include obtaining a bachelor’s or master’s degree recognized in an EU Member State; completing three years’ work experience in auditing; and passing the professional exam organized by CACR. CACR reports that last it compared the requirements of the 2019 IES & revisions to IES 2, 3, 4, and 8 (effective in January 2021) with its IPD requirements and subsequently incorporated amendments as described in its SMO Action Plan. Universities are responsible for defining the university accounting education curricula. According to the 2013 Report on the Observance of Standards and Codes on Accounting and Auditing (ROSC) the curricula follow education requirements in line with earlier versions of the IES.

To maintain an auditor’s license, auditors must remain members of CACR and adhere to its rules and regulations, which include CPD obligations. As stipulated in the law, statutory auditors are required to complete up to 60 hours per year of CPD and CACR members must complete a minimum of 40 hours of CPD annually. In 2016, CACR amended its CPD policies to permit auditors to participate in soft skills training courses as part of their CPD requirements for up to 5 hours annually to align with the IES requirements. In line with IES 8, starting in 2023, engagement partners are obliged to demonstrate minimum of 8 hours spent on learning outcomes from audit, governance and risk management, business environment, information and communication technologies and professional skepticism, professional judgement, commitment to the public interest and ethical principles.

Other professional accountants, such as tax advisors, bookkeepers, etc., may voluntarily join another professional accountancy organization and be subject to its rules and regulations, including education requirements.

The Union of Accountants, which unites professional accountants on a voluntary basis, offers qualifications of Certified Accountant and Accounting Expert and has established requirements for a final assessment. However, it is unclear if there are additional IPD or CPD that align with the requirements and best practices of the latest IES (2019 version).

The Chamber of Tax Advisors of the Czech Republic, in cooperation with the Ministry of Finance, unites tax consultants on a voluntary basis, and offers the qualification of Tax Consultant. While it has established a final assessment and provides training opportunities, it is similarly unclear if there are additional IPD or CPD that align with the requirements and best practices of the IES (2019 version).

Current Status: Partially Adopted

The Act on Auditors of 2009 as amended in 2022 delegates audit standard-setting authority to the Chamber of Auditors of the Czech Republic (CACR) under the supervision of the Public Audit Oversight Board (PAOB) which approves final auditing standards.

CACR has established an ongoing process to translate, adopt, and publish the ISA as issued by the IAASB. The 2021 Handbook is currently effective. ISA 600 (effective December 2023) will be translated and adopted by end of 2023.

Current Status: Adopted

Auditors are subject to ethical requirements, as per the Act on Auditors of 2009 as amended in 2022 that are set by the Chamber of Auditors of the Czech Republic (CACR) under the supervision of the Public Audit Oversight Board (PAOB), which has the final approval of the ethical requirements.

CACR maintains an ongoing process to incorporate new and amended standards into national requirements. CACR has translated and adopted the 2022 version of the International Code of Ethics issued by IESBA.

Other professional accountants, such as bookkeepers and tax consultants, are regulated through their voluntary membership in other professional accountancy organizations such as the Union of Accountants (UOA), or the Chamber of Tax Advisers (CTA). Both UOA and CTA establish ethical requirements for their members; however, the requirements do not appear to align with the latest International Code of Ethics for Professional Accountants.

Current Status: Adopted

The Ministry of Finance is responsible for accounting standard-setting for public sector entities while the Supreme Audit Office (SAO) is responsible for translating IPSAS.

Per the Chamber of Auditors of the Czech Republic and the CIPFA/IFAC 2020 International Public Sector Financial Accountability Index financial reporting in the Czech Republic is based on accrual-basis accounting and with national standards referencing and “significantly inspired by” IPSAS.

Current Status: Partially Adopted

Under the Act on Auditors of 2009 as amended in 2022, investigation and discipline (I&D) of auditors is performed by the Chamber of Auditors of the Czech Republic (CACR), under the oversight of the Public Audit Oversight Board (PAOB). PAOB conducts its own I&D proceedings for auditors of public interest entities.

In line with CACR's internal regulations, the Supervisory Committee conducts investigations while the Disciplinary Committee conducts disciplinary hearings and may issue sanctions. The Supervisory Committee has eleven members responsible for monitoring the quality of auditors’ work, compliance with relevant legislation, and CACR’s internal regulations. The Disciplinary Committee issues its decisions no later than 30 days from the commencement of the proceeding and may add up to 30 additional days if local inquiries are needed or a case is particularly complex. The PAOB also acts as the appeals body when an auditor disagrees with a decision. CACR completed a self-assessment of its I&D system against SMO 6 requirements and reports that its processes meet the majority of the SMO 6 best practices. The Disciplinary Committee is composed of 7 members elected from the statutory auditors. However, the Disciplinary Committee uses support in its work including CACR employees who have legal education.

Other professional accountants, such as bookkeepers and tax consultants, are regulated through their voluntary membership in other professional accountancy organizations such as the Union of Accountants (UOA), or the Chamber of Tax Advisers (CTA). Both UOA and CTA establish enforcement procedures for their members; however, a diagnostic on alignment with the SMO 6 benchmark is not available.

The Accounting Act of 1991 (as amended in 2021) also stipulates that an accountant that fails to perform duties as per Section 37 of the law is subject to sanctions imposed by the Ministry of Finance.

Current Status: Partially Adopted

The Ministry of Finance (MoF) is responsible for the adoption and promulgation of accounting standards in the Czech Republic in accordance with the Accounting Act of 1991 as amended in 2022.  

EU-endorsed IFRS are required for the preparation of separate and consolidated financial statements of entities whose securities trade in a regulated market. Other entities have the option to prepare their consolidated financial statements in accordance with IFRS. If other entities decide to do so, all consolidated entities can use IFRS as a basis for preparation of their stand-alone financial statements. EU-endorsed IFRS have slight modifications from IFRS (e.g., temporary 'carve-out' from IAS 39 Financial Instrument: Recognition and Measurement and a temporary extension of the scope of applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts) but according to the IFRS Foundation, the modifications affect a limited number of companies and the majority of companies that do not apply the options can state full compliance with the IFRS.

A new accounting law is expected to come into force January 1, 2025. Among other matters, the new law will require IFRS application for more companies, including banks, insurance companies, and investment funds.

Companies are also required to keep accounting records in accordance with Czech GAAP for tax purposes or reconcile their EU-endorsed IFRS financial statements to Czech GAAP. Czech GAAP are bookkeeping instructions needed to account for a specific transaction. Detailed accounting guidance for other entities is given in the Decrees on Accounting and Czech Accounting Standards, issued by the Ministry of Finance.

IFRS for Small- and Medium-sized Entities (SMEs) is not adopted and there are no known plans for adoption.

Current Status: Partially Adopted

Relevant Organizations

• Accountancy Europe
• Chamber of Auditors of the Czech Republic (CACR)
• Chamber of Tax Advisors (CTA)
• Czech National Accounting Board
• Czech National Bank
• Czech Republic Ministry of Finance
• National Accounting Council
• Prague Stock Exchange
• Public Audit Oversight Board
• Union of Accountants

Relevant Legislation

• Accounting Act of 1991 as amended in 2021 (Czech)
• Audit Act of 2009 as amended in 2022
• Commercial Code of 2012
• Inspection Code of 2012
• Statute of the Public Audit Oversight Board of 2009 (as amended in 2018)
• Tax Advisory Services and the Chamber of Tax Advisers of the Czech Republic Act of 1992 as amended in 2020

Relevant Publications

• Accountancy Europe, FEE Survey on Structure and Organisation of the Accountancy Profession across 30 European Countries, March 2012.
• Accountancy Europe, Member State Implementation of Directive 2014/95/EU, 2017.
• --, Organization of the Public Oversight of the Audit Profession in Europe, a Survey, March 2018.
• --, Definition of Public Interest Entities in Europe, March 2019.
• --, Structure and Organization of the Accountancy Profession Key features: Czech Republic, 2020.
• CACR, SMO Action Plan, 2022.
• Czech Republic Supreme Audit Office, Annual Reports.
• European Commission, Audit Directive – Transposition Status, May 24, 2018.
• Fucik, Amendment to the Act on Accounting (Effective from 1 January 2016), August 2015.
• IFIAR, Member Profile: Public Audit Oversight Board, 2022.
• IFRS Foundation, IFRS Application Around the World—Jurisdictional Profile: Czech Republic, July 2016.
• --, IFRS Application around the World – Jurisdictional Profile: European Union, December 2021.
• KPMG, EU Audit Legislation in the Czech Republic, September 2016.
• Public Audit Oversight Board, Disciplinary Rules of the Public Audit Oversight Board, April 2018.
• Public Audit Oversight Board, Rules of Quality Inspections, April 2018.
• Public Audit Oversight Board, Statute of the Public Audit Oversight Board, March 2018.
• Strouhal, J., & Kallaste, K. Professional Qualification of Accountants in Czech Republic and Estonia: Are Their Certification Schemes Really Different? 2010.
• University of Economics, Important Changes in the Czech Accounting Regulatory System, 2015.
• World Bank, Report on the Observance of Standards and Codes (ROSC)--Accounting & Auditing: Czech Republic, June 2013.