AUDIT ALERT - Significant changes in the preparation and auditing of annual reports for the year 2015!

3rd December 2015

Dear Business Friends,

The last amendment to the Act on Accounting and other acts No. 221/2015 Coll. brings a significant change in the area of auditing annual reports. This change does not only affect auditors, but especially the actual accounting units that have an audit obligation and thus the obligation to prepare an annual report. This change is included in the aforementioned amendment in part four (a change to the Act on Auditors), effective from 1 January 2016. The new procedures are used according to the transitional provisions on all statutory audits begun and not completed before the day this amendment comes into effect.

All auditor reports issued after 1 January 2016 (i.e. including auditor reports for the year 2015) concerning financial reports must also contain the auditor’s statement on the annual report. Thus starting 1 January 2016 the auditor will be obliged to issue only one auditor’s report, which will contain both the auditor’s opinion on the financial statements and also the auditor’s statement on the annual report. According to the amendment to the Act it will no longer be possible, as it has been until now, for the auditor to express its opinion on the financial statements and the annual report in two separate reports.

This could bring complications to those accounting units that were used to preparing the annual report sometime after the financial statements are prepared. In order for the auditor to properly complete the audit it is necessary for the accounting unit to submit the annual report to be audited (specifically its final version prepared for publishing) even before the auditor’s report is issued. We recommend taking this new legislative requirement into consideration when setting up the schedule for preparing the financial reports and annual report on the part of the accounting unit so that the completion of the statutory audit is not endangered.

If the accounting unit does not submit all or part of the annual report before the auditor’s report is issued, the auditor is obliged to draw attention in its auditor’s report that it did not receive all or part of the annual report, while indicating everything the auditor was not able to express its opinion on.

With this new legislative situation accounting units are recommended to carefully configure the schedule for the preparation and delivery of information to the auditor, not only for the auditing of the financial statements, but also for the purpose of expressing the opinion on the annual report.

If the accounting unit does not deliver the annual report to the auditor before the auditor’s report is issued, this does not mean that the accounting unit can publish the annual report without it being audited by the auditor. The auditor is obliged to audit an annual report submitted after the auditor’s report is issued and in the case of any inaccuracies the auditor is obliged to propose corrections. It will, however, no longer be possible (with the exception of cases of specific professional auditor standards) for the auditor to issue a second auditor’s report. 
Yours sincerely,

Mazars Czech Republic

 

CONTACT:

Jana Švenková

Audit Partner

tel.: +420 224 835 730

email: jana.svenkova@mazars.cz