Czech Republic

Member Organizations

Member Organization Associate Other PAOs

  Chamber of Auditors of the Czech Republic

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    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 as it relates to accounting and auditing.

    Accounting Framework

    The Accounting Act of 1991 as amended in 2016 stipulates the requirements for 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 companies whose securities trade in a regulated market. In the Czech Republic, the Prague Stock Exchange, the Power Exchange Central Europe, and the RM-System Czech Stock Exchange are the regulated markets. 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. Banks and insurance companies are required to follow the same provisions (with some differences) as general companies when preparing financial statements.

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

    Auditing Framework

    European Union member states had until June 17, 2016 to transpose the European audit reform package, comprising the 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, into their national legislation. The Czech parliament passed amendments to the Act on Auditors on August 25, 2016. 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.

    Effective October 2016, a change in the legislation resulted in new categories of entities. The new categories redefine which entities are subject to statutory audit, and set reporting requirements. 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. The Chamber adopted and published the 2016-2017 Handbook of International Quality Control, Auditing Review, Other Assurance and Related Services Pronouncements on its website in English.

  • Regulation of Accountancy Profession

    Only auditors are regulated at the state level under the Act on Auditors of 2009 as amended in 2016. The law outlines the roles of the Public Audit Oversight Board (PAOB) and the 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.

    In order 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 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 1(a) to (h) of the Act, CACR can allow applicants to take the auditors’ oath. CACR can also 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 the 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.

    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 four years practical experience. 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 13 examinations, 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, in cooperation with the Ministry of Finance, 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 2017 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 a number of training sessions and seminars to help candidates prepare for the qualifying exam.

  • Audit Oversight Arrangements

    The Act on Auditors of 2009 as amended in 2016 established the Public Audit Oversight Board (PAOB) as the independent public audit oversight authority.

    The PAOB is responsible for (i) overseeing all of the Chamber of Auditors of the Czech Republic (CACR)’s 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.

    The Public Audit Oversight Board is a member of the International Forum of Independent Audit Regulators.

  • Professional Accountancy Organizations

    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 2016. 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 (QA) 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 the National Accounting Board and 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 2016.

    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 professionals 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.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    The Act on Auditors of 2009 as amended in 2016 stipulates that a quality assurance (QA) review system for all audits be established and be operated by the Chamber of Auditors of the Czech Republic (CACR) subject to the oversight of the Public Audit Oversight Board (PAOB). The PAOB will be carrying out QA reviews of audits of PIEs while CACR will maintain responsibility for QA reviews of non-PIEs. Presently, CACR seems to be conducting QA reviews of all audits.

    The scope of the QA program covers all audits and other assurance engagements. CACR employs staff inspectors to lead the inspections, ensuring adherence to ISQC 1 and other related standards, and are supported by practitioners who provide technical support. Members of the inspection department receive annual training.

    Inspections are conducted at least once every six years for audits of non-public interest entities (PIEs) and at least once every three years for audits of PIEs by the Public Audit Oversight Board that overtook the responsibilities of the Chamber in relation to PIEs.

    CACR reports that the QA review system is in line with the requirements of SMO 1 and the European Union’s 8th Company Law Directive on Statutory Audit.

    Current Status: Adopted

  • International Education Standards

    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 2016 and are implemented by the Chamber of Auditors of the Czech Republic (CACR) under the oversight of the Public Audit Oversight Board 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. While CACR reports that it compared the requirements of the revised 2015 IES requirements with its IPD requirements and subsequently incorporated amendments, universities are responsible for the 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.

    CACR reports that it conducted a comparison of its internal education guidelines with 2015 IES requirements in early 2016 and identified only one discrepancy which was that CACR did not recognize soft skills education as part of CPD. However, CACR amended its requirements in 2016 to allow auditors to participate in soft skills training courses as part of their CPD requirements for up to 5 hours annually.

    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 IES.

    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.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Act on Auditors of 2009 as amended in 2016 delegates audit standard-setting authority to the Chamber of Auditors of the Czech Republic (CACR) under the supervision of the Public Audit Oversight Board which approves final auditing standards.

    CACR adopted and published the 2016-2017 Handbook of International Quality Control, Auditing Review, Other Assurance and Related Services Pronouncements on its website in English.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    Auditors are subject to ethical requirements, as per the Act on Auditors of 2009 as amended in 2016 that are set by the Chamber of Auditors of the Czech Republic (CACR) under the supervision of the Public Audit Oversight Board , which has the final approval of the ethical requirements.

    As of the date of the assessment, CACR reportedly issued and translated the 2016 version of the IESBA Code of Ethics in English and Czech. It also indicates that it maintains an ongoing process to incorporate new and amended standards into national requirements. CACR is currently working on translating the 2018 revised IESBA Code of Ethics into Czech which it anticipates will be available on its website by the end of 2018.

    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, or the Chamber of Tax Advisers. It is unclear if either of these organizations establishes ethical requirements for their members.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    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. The SAO is also responsible for training auditors on relevant IPSAS updates during scheduled trainings.

    The Chamber of Auditors of the Czech Republic reports that financial reporting in the Czech Republic is strictly based on accrual-basis accounting and is ‘significantly inspired by IPSAS’.

    Apart from this information, no details are available on any law(s) that might stipulate public sector accounting standards or a potential timeline for full adoption of IPSAS.

    Current Status: Partially Adopted

  • Investigation and Discipline

    Under the Act on Auditors of 2009 as amended in 2016, 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). The 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 nine 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 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 as a means to share further information on its procedures. CACR reports that its processes would be fully in line with SMO 6 requirements except that all the members of the Disciplinary Committee are auditors.

    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, or the Chamber of Tax Advisers. It is unclear if these organizations have set-up I&D systems for their members. However, the Accounting Act of 1991 (as amended in 2016) stipulates that accountants that fail to perform duties as per Section 37 of the law are subject to sanctions imposed by the Ministry of Finance.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    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 2016.  

    All registered entities in the Czech Republic with their shares or bonds being listed on any European-regulated stock exchange are required to prepare their financial statements (both stand-alone and consolidated) in accordance with IFRS as endorsed by the European Union (EU). 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.

    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. Banks and insurance companies are required to follow the same provisions (with some differences) as general companies when preparing financial statements.

    IFRS for Small- and Medium-sized Entities (SMEs) is not adopted and there are no known plans for adoption. SMEs can chose to apply either the Czech GAAP or the EU-endorsed IFRS in the preparation of financial statements.

    Current Status: Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 11/2018
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