Intent Declared Summary

According to the Chamber of Auditors of the Czech Republic’s (CACR) website, the Czech Republic's transition from national auditing standards to International Standards on Auditing (ISAs) started in 2003. National auditing standards were gradually withdrawn and, in 2004, the CACR decided to implement ISAs in the audits of financial statements covering periods beginning on or after January 1, 2005. As explained in the 2006 CACR self-assessment, the Chamber adopts International Auditing and Assurance Standards Board’s (IAASB) pronouncements, including ISAs, although with adaptations to reflect the local legal environment. Since 2004, the CACR has been publishing a Czech translation of the Handbook of International Auditing, Assurance, and Ethics, and, at the time of the 2006 self-assessment, the latest version of ISAs had been published. However, the IAASB has since revised some standards. In its 2009 action plan, the CACR reiterated its commitment to the on-going convergence process and noted that the 2008 Handbook was expected to be translated into Czech by August 2008. As of December 2009, there is no information as to whether the translation has been completed.

General Overview

A World Bank review of the accounting and auditing environment in the Czech Republic led to the publication of a Report on the Observance of Standards and Codes (ROSC) in July 2003. International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISAs) were used as benchmarks for assessing national standards. The World Bank report observed that "although Czech standards are largely based on ISA, important differences remain with adverse impact on robustness of the Czech standards" (p. 13). Consequently, the World Bank made policy recommendations concerning amendment of accounting and auditing laws and standards and also recommended that the Czech Republic adopt ISAs and the Code of Ethics developed by the International Federation of Accountants.

Under the Act on Auditors, audits of fincial statements are to be conducted in accordance with Czech Standards on Auditing. According to the 2006 Chamber of Auditors of the Czech Republic (CACR) self-assessment, in May 2003 the Czech authorities made the decision to transition from the national auditing standards to ISAs. The following year, the CACR decided that audits will be conducted in accordance with ISAs for financial statements covering periods beginning on or after January 1, 2005. The 2006 CACR’s self-assessment explains that "national auditing standards 1-27 will be gradually withdrawn in dependence on audited period. National auditing standards 50-55 will remain in force unless otherwise decided by the Council. National auditing standards will be replaced by generally acceptable International Standards on Auditing (ISA) issued by IFAC (International Federation of Accountants) that will be gradually amended by national application clauses (if necessary)" (p. 95). Further, the CACR publishes the Czech translation of the Handbook of International Auditing, Assurance, and Ethics, and, at the time of the self-assessment, the latest, 2006 version of the Handbook had been translated. In its 2009 action plan, the CACR reiterated its commitment to the on-going convergence with ISAs and noted that the 2008 Handbook was expected to be translated into Czech by August 2008.

The Czech Republic thus complies with the Directive No. 2006/43/EC of the European Parliament and Council that requires all statutory audits of annual and consolidated accounts to be carried out in accordance with international auditing standards as adopted by the European Commission (EC). Although it is not specified which standards constitute international auditing standards, it is widely anticipated that ISAs as issued by the IAASB will be adopted. Per a 2009 EC publication, Czech Republic has fully transposed the above-mentioned Directive into its national legislation.

The 2003 World Bank report provides information on the legal and regulatory framework for auditing in the Czech Republic. According to the report, the Code of Commerce requires that all joint stock companies be audited. In addition, the Act on Accounting regulates the obligation to have annual financial statements audited by a statutory auditor. Businesses are required to undergo audit if they have achieved or exceeded at least two of the following criteria: (1) balance sheet total of Euro 1.3 million; (2) net turnover of Euro 2.6 million; and (3) the average number of employees of 50With regard to the regulatory framework, Act No. 6/1993 Coll. on the Czech National Bank (CNB) created the CNB as the integrated regulator for the financial sector on April 1, 2006, when the CNB assumed the responsibilities of the Czech Securities Commission, the Ministry of Finance's Office for Supervision of Insurance and Supplementary Pension Insurance, and the Office for Supervision of Credit Unions. The CNB, therefore, is responsible for the supervision of the banking sector, the capital market, the insurance and pension industry, and credit unions. Per its website, "the CNB lays down rules safeguarding the stability of the banking sector, the capital market, the insurance industry and the pension scheme industry. It systematically regulates, examines, assesses and, where appropriate, issues penalties for non-compliance with these rules." The 2003 World Bank report added that, at the time of the assessment, the CNB could impose fines or de-license any bank for non-compliance with accounting or regulatory rules. For listed banks, the CNB could additionally impose fines up to three (in some cases six) percent of total assets of the bank. The CNB also had the authority to veto audit appointment in a bank.

The CACR is the auditing standard-setter in the Czech Republic. As described on the CACR website, the Chamber is a self-governing body established by the Act on Auditors (No. 254/2000 Coll.) to regulate the audit profession. With regard to the Code of Ethics, the 2006 CACR’s self-assessment noted that the CACR’s code of ethics was based on the 2001 version of the IFAC Code. However, the revised IFAC code was expected to be translated in 2006 and subsequently replace the existing CACR’s code. In this respect, the 2009 action plan prepared by the CACR states that the Chamber will “continue to support ongoing adoption and implementation of the IFAC Code of Ethics” (p. 9).The CACR and the Union of Accountants of the Czech Republic are listed as members on the IFAC website.

The Principles

IDISA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing (effective 2009)

According to the 2006 CACR’s self-assessment, the Czech Republic adopts IAASB pronouncements, including ISAs, although with adaptations to reflect the local legal environment. At the time of the 2006 self-assessment, the latest, 2006 version of ISAs had been published. However, the IAASB has since revised some standards. In its 2009 action plan, the CACR reiterated its commitment to the on-going convergence process and noted that the 2008 Handbook was expected to be translated into Czech by August 2008.

IDISA 210 Agreeing the Terms of Audit Engagements (effective 2009)

See ISA 200.

IDISA 220 Quality Control for an Audit of Financial Statements (effective 2009)

See ISA 200.

IDISA 230 Audit Documentation (effective 2009)

See ISA 200.

IDISA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements (effective 2009)

See ISA 200.

IDISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2009)

See ISA 200.

IDISA 260 Communications of Audit Matters with Those Charged With Governance (effective 2009)

See ISA 200.

IDISA 300 Planning an Audit of Financial Statements (effective 2009)

See ISA 200.

IDISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2009)

See ISA 200.

IDISA 320 Materiality in Planning and Performing an Audit (effective 2009)

See ISA 200.

IDISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2009)

See ISA 200.

IDISA 402 Audit Considerations Relating to an Entity Using a Service Organization (effective 2009)

See ISA 200.

IDISA 500 Audit Evidence (effective 2009)

See ISA 200.

IDISA 501 Audit Evidence—Specific Considerations for Selected Items (effective 2009)

See ISA 200.

IDISA 505 External Confirmations (effective 2009)

See ISA 200.

IDISA 510 Initial Audit Engagements—Opening Balances (effective 2009)

See ISA 200.

IDISA 520 Analytical Procedures (effective 2009)

See ISA 200.

IDISA 530 Audit Sampling (effective 2009)

See ISA 200.

IDISA 540 Audit of Accounting Estimates (effective 2009)

See ISA 200.

IDISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004, superseded by ISA 540 in December 2009)

See ISA 200.

IDISA 550 Related Parties (effective 2009)

See ISA 200.

IDISA 560 Subsequent Events (effective 2009)

See ISA 200.

IDISA 570 Going Concern (effective 2009)

See ISA 200.

IDISA 580 Written Representations (effective 2009)

See ISA 200.

IDISA 600 Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors) (effective 2009)

See ISA 200.

IDISA 610 Using the Work of Internal Auditors (effective 2009)

See ISA 200.

IDISA 620 Using the Work of an Auditor’s Expert (effective 2009)

See ISA 200.

IDISA 700 Forming an Opinion and Reporting on Financial Statements (effective 2009)

See ISA 200.

IDISA 705 Modifications to the Opinion in the Independent Auditor’s Report (effective 2009)

See ISA 200.

IDISA 710 Comparative Information—Corresponding Figures and Comparative Financial Statements (effective 2009)

See ISA 200.

IDISA 720 The Auditor’s Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements (effective 2009)

See ISA 200.

IDISA 800 Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks (effective 2009)

See ISA 200.