Audit We perform statutory (i.e. mandatory) audit for entities that meet the criteria specified in the Accounting Act: for businesses, non-profit organisations, foundations or the public sector institutions. We review annual reports and reports on related party transactions. We also perform non-mandatory audit or review of financial statements that is used by our clients for their internal purposes. Inspections of the accounting system can reveal the risk of fraud or error and verify whether tax and accounting matters comply with effective legislation. The statutory auditor needs to be appointed by the company’s supreme body such as the General Meeting or Management Board, depending on the type of the company. The Auditor’s Report must be published in the Commercial Register together with the audited financial statements. The criteria for mandatory audit will be as follows from 1 January 2016: Entities will be classified into four categories. The categories, which will be considered on the basis of whether two of three criteria will be exceeded by the entity, are as follows: Micro entity Not exceeding two of the three criteria: Assets of CZK 9 million; turnover of CZK 18 million; 10 employees. Small-sized entity Not exceeding two of the three criteria: Assets of CZK 100 million; turnover of CZK 200 million; 50 employees. Medium-sized entity Not exceeding two of the three criteria: Assets of CZK 500 million; turnover of CZK 1 billion; 250 employees. Large entity Exceeding at least two of the three criteria: Assets of CZK 500 million; turnover of CZK 1 billion; 250 employees, or the entity is a public interest entity. Assets = net value of assets. In classifying an entity into a category for 2016, the figures as of 31 December 2015 are material. In order to be re-classified, at entity has to exceed (or to not exceed) two of the three specified criteria in two successive accounting periods. If the relevant criteria are exceeded (or not exceeded) in only one year, the entity shall remain in the same category. The following entities are obliged to have their financial statements audited and to prepare the annual report: Large entities, except for institutions fully funded or receiving contributions from the state budget, which are not public interest entities. Medium-sized entities. Micro entities only in case that this obligation has been specified by a special regulation. Small-sized entities in case that this obligation has been specified by a special regulation or if the entity meets the conditions of the Accounting Act as provided in Section 20 “Reviews of Financial Statements by Auditor”: Entities that exceeded or reached the following levels at the end of the balance sheet date of the accounting period, for which the financial statements are reviewed, and the immediately preceding accounting period (two years): Total assets over CZK 40,000,000; Annual total of the net turnover over CZK 80,000,000; and Average re-calculated headcount during the accounting period more than 50, depending on the type of the company: With respect to at least one of the three specified criteria for joint stock companies and trust funds. With respect to two of the three specified criteria for other small-sized entities. Entities if the audit obligation is specified by a special regulation. The auditor shall also review the consolidated financial statements. If you are uncertain as to whether your financial statements have to be audited, please feel free to contact us, we will be happy to provide an advice.