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Czech Republic

Accounts

Updated 07/2012

Legal requirements

Legislation of the Czech Republic

The area of accounting and the requirements of audits are governed in the Czech Republic by the Act on Accounting and the implementing regulations.

The Ministry of Finance issues the Czech Accounting Standards, which specify the obligations of accounting units. The text of the Czech Accounting Standards may be found on the following website.

The performance of mandatory audits is governed in the Czech Republic by the Act on Auditors.

EU legislation

Legal arrangements in the field of accountancy and auditing conform to European Union law.

The EU legislation which forms the basis for the legal regulation of accounting and auditing in the individual Member States.

Accounting

The Accountancy Act and the implementing legislation set out the scope of book-keeping, and especially the:

  • definition of accounting units,
  • subject of accounting,
  • method of account keeping,
  • period of account keeping, obligations and responsibility for account keeping,
  • definition of accounting documents, account entries, account books,
  • requirements for the content and form of accounts and consolidated accounts and methods of publication,
  • obligation for accounts to be verified by an auditor,
  • options and obligations to use International Accounting Standards,
  • obligation and methods in respect of the valuation of assets and liabilities,
  • stock-taking and retention of accounting records,
  • penalties for failing to keep accounts, failing to compile accounts and failing to fulfil other obligations arising from the Accountancy Act.

The obligation to keep accounts applies only to accounting units:

  • legal entities having a registered office in the Czech Republic,
  • foreign entities, if they are doing business in the Czech Republic or carrying on another activity under specific legislation (the conditions applying to foreign natural persons in respect of account keeping are the same as the conditions applying to Czech natural persons in respect of account keeping),
  • organisational units of the State, under the specific legislation,
  • natural persons recorded as entrepreneurs in the Commercial Register,
  • other natural persons who are entrepreneurs, provided that their turnover under the Act on Value Added Tax, including operations which are not liable to this tax and which do not form part of their turnover from business activities, does not exceed CZK 25 million for the immediately preceding financial year, counting from the first day of the financial year.
  • other natural persons who keep accounts at their own choice,
  • other natural persons who are entrepreneurs and who participate in organisations that have no legal personality under the specific legislation,
  • other natural persons whose obligation to keep accounts is laid down by specific legislation.

Certain companies are obliged to keep accounts and compile accounts that comply with International Accounting Standards (IAS). These are companies whose securities have been listed for trading on a regulated market in one of the EU Member States. A decision to use IAS for account keeping and compiling individual accounts may also be taken by accounting units in consolidation, as long as they use IAS for compiling consolidated accounts.

Compiling accounts

Accounts consist of:

  • a balance sheet,
  • profit and loss statement,
  • annex explaining and supplementing the information contained in the balance sheet and the profit and loss statement.

A financial statement may also include an overview of cash-flow and changes to equity capital.

Financial statements must include:

  • name and surname of the firm or name of the accounting unit; in some cases the head office or place of residence and place of business as well,
  • identification number, where one has been assigned to the accounting unit,
  • legal form of the accounting unit,
  • business activity or other activities, or the purpose for which it was set up,
  • balance sheet day or other deadline for compiling the accounts,
  • the time when the accounts are compiled.

Accounting units compile accounts in a full or simplified format.

Accounts may be compiled in the simplified format by accounting units which are not obliged to have the accounts verified by an auditor.

Financial statements are compiled as at the balance sheet day. Accounting units that are obliged to have their accounts verified by an auditor must also produce an annual report.

The financial statements and the annual report are published in the Commercial Register. Accounting units must archive financial statements and annual reports for at least ten years.

Audit

Under Czech law, all the accounts of the following accounting units must be verified by an auditor, unless specified otherwise:

  • joint stock companies, if, as at the end of the balance sheet day of the accounting period for which the accounts are being verified, and the accounting period immediately prior to this, at least one of the three following criteria is exceeded or achieved:
    • total assets of more than CZK 40,000,000;
    • total net annual turnover of more than CZK 80,000,000;
    • an average of more than 50 employees during the accounting period, calculated using the method laid down by the specific legislation.
  • other companies and cooperatives, if, as at the end of the balance sheet day of the accounting period for which the accounts are being verified, and the accounting period immediately prior to this, at least two of the three criteria set out above are exceeded or achieved; for cooperatives an 'employee' shall also mean a member of the cooperative,
  • natural persons who fulfil the criteria applying to other companies and cooperatives,
  • accounting units having this obligation under specific legislation.

The performance of mandatory audits is governed in the Czech Republic by the Act on Auditors.

The Act on Auditors regulates the position and activities of auditors, as well as the conditions under which an auditor's services can be provided. Licences to perform the activities of an auditor are issued by the Chamber of Auditors of the Czech Republic. One of the conditions for performing the activities of an auditor is to pass an examination and to be entered in the list of auditors kept by the Chamber as the independent body for all statutory auditors.

The Audit Public Oversight Council is the institution that supervises the Chamber of Auditors of the Czech Republic and the activities of auditors.

The Register of Auditors is a list of names of the auditors (natural persons) and firms of auditors that are licensed to provide auditing services.

The verification of accounts is carried out in accordance with the Code of Ethics and the International Standards of Auditing (ISA) as modified by the European Commission and the standards issued by the Chamber of Auditors of the Czech Republic.

 

Administrative procedures

Retention and submission of documents

The retention of accounting documents is important mainly for safeguarding the evidential information from book-keeping. There are various time periods stipulated for retention. Accounting records may be used in tax proceedings, administrative proceedings and criminal proceedings, and for social security and public health insurance purposes.

The Accountancy Act stipulates the following archiving periods:

  • 10 years for accounts (balance sheets, profit and loss reports) and annual reports,
  • 5 years for accounting documents, account books, depreciation plans, stock-taking schedules.

Resources

The following governmental and non-governmental web portals offer further information.

Help & advice

Help & advice

The Ministry of Finance - Accountancy and Audit Division is responsible for drafting and amending legislation in the area of accountancy, auditing and tax advice. It initiates amendments and expresses views on other draft legislation based on planning and legislative activities in the field of accountancy, auditing and tax advice.

The Chamber of Auditors of the Czech Republic is an independent professional organisation established under Act No 254/2000 for the purposes of administrating the auditing profession in the Czech Republic. The Chamber assumed the rights and obligations of the Chamber established under the previous law of 1992. Since 14 April 2009 the activities of the Chamber have been governed by Act No 93/2009.

The Audit Public Oversight Council (RVDA) is the body for the public supervision of auditing activities, established under Act No 93/2009 on auditors, which applies to all statutory auditors (natural persons) and firms of auditors. The Council is also entrusted with supervising the activities of the Chamber of Auditors of the Czech Republic and is independent of the auditing profession.

The Union of Accountants is a voluntary professional organisation bringing together accountants, auditors and tax advisors.

The Chamber of Certified Accountants is an independent organisational unit within the Union of Accountants. It publishes a Code of Ethics and other standards regulating the activities of certified accountants, monitors compliance with the standards and provides continuous professional training.

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