A plethora of changes in accounting rules perhaps hide a change of a little different kind that took effect in the Czech Republic on 1 January 2016, namely an auditor's report covering both the financial statements and the annual report in the case of "statutory audits of financial statements".In addition to financial statements, accounting entities subject to statutory audit were and are also obliged to prepare an annual report. The audit should then cover not only the financial statements of such a company, but also the annual report. In other words, in the case of accounting entities subject to statutory audit the auditor should give an opinion not only on the financial statements, but also on the annual report together with the report on relations. Moreover, the audited financial statements have been included in this annual report.
This responsibility were tackled differently by both auditors and accounting entities subject to statutory audit. The first option was for the auditor to issue an auditor's report on the financial statements and this was included in the annual report with the report on relations, while the auditor gave an opinion once again on the entire annual report. The second option was for the auditor to only provide one opinion, namely on the financial statements, as well as on the annual report and on the report on relations.
In statutory audits, when a report is issued after 1 January 2016, the auditor should no longer issue a separate auditor's report only on the financial statements. In such cases, the auditor should only issue one audit report covering both the financial statements and the "other information", i.e. the annual report and the report on relations.
This means that before an auditor's report is issued, the auditor must have both the draft financial statements and the annual report. This terminates the common practice that auditors gave opinions on financial statements of companies subject to statutory audit in the first half of the year following the audited period, the annual report was often created in the autumn, and the auditor's report on the annual report was often not issued until just before the end of the following year to meet the statutory deadline for publication of the audited annual report by the end of the following year.
The new practice will thus create new demands on the collaboration of accounting entities subject to statutory audit and auditors.
From an auditor's perspective, the report on relations should then be part of the annual report and it should be treated this way by the auditor. In other words, the auditor should not give an opinion on the report on relations separately.
Of course, a question arose of how the auditor should act if an accounting entity subject to statutory audit did not prepare the annual report and insisted that the auditor should only issue an auditor's report on the financial statements. A long discussion on this topic in auditing circles concluded that in such cases the auditor should only issue an auditor's report on financial statements, stating in it, namely in the section "Other information", that the annual report was not prepared in accordance with the law by the accounting entity and, therefore, the auditor does not give an opinion on it. Such a form of auditor's report will probably not be desirable.
However, what should be done if an auditor issues such an auditor's report and the accounting entity subsequently prepares an annual report and again demands the auditor to give an opinion on it?
The current view is that this situation cannot be remedied and the auditor will not give an opinion on such an annual report. Therefore, unfortunately, responsibility for this will be fully with the statutory bodies of the accounting entity subject to statutory audit.
