On 1 July 2016, the amendment to the Auditors Act was passed by the lower chamber of the Czech Parliament. The amendment is submitted to the Senate of the Czech Parliament and it is highly likely that the amendment will be signed by the President of the Republic before the end of the holidays.
The amendment is based on the European Union regulation and should have been implemented into Czech law by no later than 17 June 2016. Since that date the auditing community has been working in some degree of uncertainty as this regulation came into force regardless of when the amendment to the Auditors Act will be approved. Nevertheless, we can trust that this uncertainty will shortly end.
The amendment significantly encroaches upon the internal affairs of audit companies and deals with auditor independence, the management and control system of auditors and audit companies and the documentation of their work.
Under the amendment an auditor may not also accept a key position, a position as a member of the audit committee or as a non-executive member of a management or supervisory body in an accounting entity for a period of one year after carrying out a statutory audit of that accounting entity or participating in activities relating to a statutory audit.
The amendment also changes how an auditor can be appointed in the case of a statutory audit. Now an auditor can also be appointed by an accounting entity’s supervisory body if the members of the supervisory body are not members of the management body.
The amendment also clarifies a withdrawal by the accounting entity from a statutory audit contract. An important provision is that a difference of opinions on the accounting solution or audit procedures does not constitute grounds to terminate the contractual relationship. However, it still applies that a withdrawal from a statutory audit contract by any party must be reported immediately to the Public Audit Oversight Board by the withdrawing party, including the reason for this withdrawal.
The amendment regulates the joint implementation of a statutory audit. If an accounting entity appoints more than one auditor to carry out a statutory audit, the appointed auditors shall prepare a joint report containing a joint statement. However, if there is a difference of opinion between the auditors, each of the auditors shall give their own statement and the reasons for their disagreement in this audit report.
The amendment also regulates the disclosure of disciplinary and other measures against auditors and audit companies.
Finally the amendment also regulates oversight of auditors who audit public-interest entities and this oversight and subsequent disciplinary proceedings are fully transferred to the remit of the Public Audit Oversight Board.
Schaffer & Partner Audit s. r. o.
Auditor certificate no. 1373