Financial Statement Audit FAQ

Browse through the most frequently asked questions – you may find the answers you’re looking for right here.

What is the purpose of an audit?
The purpose of a statutory audit is to provide an independent and qualified professional opinion on the reliability of the financial statements prepared and published by a company’s management. The auditor verifies whether the financial statements present a true and fair view of the company’s financial position, performance, and cash flows, in accordance with Czech accounting regulations or other applicable frameworks, often International Financial Reporting Standards (IFRS). The auditor’s opinion is valid only in connection with the specific set of financial statements to which it relates.

When is an audit mandatory and when is it voluntary?
An audit is mandatory if a company meets certain statutory thresholds (e.g., turnover, number of employees, or total assets). Outside of these cases, a company may voluntarily request an audit, e.g., to increase credibility with investors or banks, when considering a purchase or sale of a business, or to provide assurance to owners and managers about financial performance.

Statutory criteria for mandatory audits under Section 20 of Act No. 563/1991 Coll., on Accounting:

Gross assets over CZK 40,000,000
Annual net turnover over CZK 80,000,000
Aore than 50 employees

Under Section 20, the following entities are subject to mandatory audits:

Large accounting entities, except for certain selected entities that are not public interest entities.
Medium-sized accounting entities.
Small accounting entities that are joint-stock companies or trust funds and that have reached or exceeded at least 1 of the 3 statutory criteria for both the current and the preceding accounting period.
Other small accounting entities that have reached or exceeded at least 2 of the 3 statutory criteria for both the current and the preceding accounting period.

What are the benefits of an audit for a company?
Beyond fulfilling a legal obligation, an audit provides an independent view of a company’s accounting and internal processes. It can identify risks, strengthen trust among business partners, support management in decision-making, and be valuable in mergers, acquisitions, or applications for financing.

Is an audit only for large companies?
No. While audits are more common in larger companies, they can also be highly beneficial for small and medium-sized businesses, especially those aiming to grow, enter new markets, attract investors, or improve risk management and internal controls.

How does an audit of financial statements work?

Engagement acceptance, strategy, and planning
Before starting the audit, we conduct necessary engagement assessments and establish a schedule and method for transferring data and information needed for the audit with the client. If the audit begins before the end of the accounting period, we conduct an interim audit. During this phase, we perform financial analysis, map management and control processes and systems, and identify main risks. Based on these findings, we then prepare specific audit tests.

Audit execution
During the interim audit, we focus primarily on testing costs and revenues. We communicate findings from control mechanism evaluations and performed tests to company management through an auditor’s letter. During the final phase, after the accounting period ends, we conduct other audit tests, including verification of financial statement preparation and disclosed information, especially those stated in the notes to the financial statements. We immediately consult any identified discrepancies with the client and arrange corrections if needed.

Audit completion
After completing the tests, the audit team discusses the results, and the responsible auditor performs the final review. We prepare complete documentation and subsequently issue the auditor’s report with the appropriate opinion. After issuing the report, we add any missing documents to the file and formally close the audit.

Contact us for more information or to arrange a consultation.

Audit Services

Audit FAQ

Responsible Managers

František Krempaský

frantisek.krempasky@ekp.czPartner and Auditor

Audit FAQ

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Audit FAQ

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Prague Office

Jihlava Office

Svitavy Office

Social Media

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