M42 - AuditingReturn

The objective of this paper is to examine the factors influencing voluntary disclosures during the Initial Public Offering (IPO) process. Through a systematic review of the literature, the paper identifies and analyses the theoretical frameworks that underpin disclosure practices, including the constraints that may limit such disclosures. Based on an examination of 330 research papers obtained from the Scopus database, the findings indicate that the dominant theoretical perspectives in this field are the signalling theory and the proprietary costs theory. By integrating insights from competing theoretical frameworks, this review offers a comprehensive understanding of the determinants driving the decision-making process undertaken by management to reveal private information in IPO prospectuses.

The article deals with the issue of audit quality of auditors of public interest entities in the Czech Republic. The research is based on publicly available data published by the Public Audit Oversight Board and data available in the Register of Auditors published on the website of the Chamber of Auditors of the Czech Republic. The analysis is based on data from the Public Audit Oversight Board among 2017-2020, while the fines imposed on auditors are analyzed among 2019-2021. The number of inspections carried out by the Public Oversight Board is relatively stable, with an increase in the ratio of total findings to total completed inspections in 2019. The amount of the average fine imposed in 2020 also increased significantly.

The article discusses the auditor's responsibility - first in general and subsequently in relation to transfer prices for related parties. The basis for the assessment of transfer prices from the auditor perspective is the view of accounting regulations and auditing standards. Based on the auditor's responsibility analysis, the article analyzes the judiciary's decision-making based on the relationship between the auditor's report and transfer prices. The research based on the case law of the Supreme Administrative Court refers to the auditors' failure in issuing auditor's reports on the financial statements. The result of the research shows that the auditor did not pay enough attention to the correct setting of transfer prices. The consequences are not only tax credits, but also incorrectly reported information on expenses (revenues) and profit or loss of the entities in their financial statements.

The article analyzes the development of the political parties and political movement's legislation, which operating in the Czech Republic since 1991 until now with a focus on selected transparency criteria. The act on association in political parties and political movements of the year 1991 is analyzed, which was more than twenty times changed during its existence. Transparency is significantly affected by some changes in law. The article compares the legislation of political parties and political movements with the legislation of other non-profit organizations in the area, which is concerned with the transparency criteria. From a comparison differences result on a level of transparency - the legislation of political parties and political movements is probably the strictest and the most sophisticated in comparison with legislation of other non-profit organizations. This is due to the function of these organizations they have in today's society.

This article discusses the basic issues associated with the blockchain. Blockchain logs transactions, so the usage is almost infinite. Blockchain can record virtually any transaction, both digital and physical. Blockchain technology would mean that trading and business have a trustworthy and transparent system, as the uniqueness is that one-time recordings cannot be edited retrospectively and therefore remain in history.
Blockchain technology could significantly reduce the cost of bookkeeping, tax advice, and auditing, to companies emerging from outsourced services or internal activities. If the transactions were to be accounted for centrally and not for separate books, then all records would be visible to notaries, banks, auditors, financial officers and other institutions transparently and in real time. These entities would be able to control transactions much easier and more efficiently, and could test much more information and data.
Blockchain technologies are expected to be used in a wide range of industries, including accounting and auditing. The aim of the article is to introduce this issue, to get acquainted with selected opinions published by relevant experts of consultancy companies, professional organizations and other institutions.

The article analyses the purpose of audit in the current market economy. The article focuses on the demand for the audit. The article presents theories of audit (Policeman theory, Lending credibility theory, Theory of inspired confidence and Agency theory) and hypothesis of existence of audit (Monitoring hypothesis, Information hypothesis and Insurance hypothesis). These theories explain the reasons for the existence of the audit and its functions. These theories and hypothesis are compared with the factors determined as crucial for forming the demand for audit services. The article compares the results to the current development and repetitive misstatements in audited financial statements. The results and presents the reasons for that.

The article analyzes the development of the foundation's legislation since 1990 until now. This period is divided into four phases depending on the effectiveness of individual legislation. Special emphasis is placed on the transparency elements contained in the individual legislation. The article compares the analyzed legislation to show their advantages and disadvantages. The article also mentions the researches dealing with the transparency of Czech foundations in the past. These researches show a low level of transparency of Czech foundations and low confidence in their activities. The Act on Foundations and Endowment Funds can be considered the highest quality law in terms of transparency. However, this law has failed to achieve a significant degree of transparency, mainly due to the state's unwillingness to enforce its implementation through the tools it had available. The current effective new Civil Code does not deal with transparency and can not be expected to contribute significant to increase its level and increase confidence in the Czech foundation sector.

Issues in relation to provision of non-audit services by statutory auditors to the audited entities start to be one of the most discussed topics among professionals on audit fields in 2016. The main reason which caused increase interest in these problems, is the entry into force of directive 2014/56/EU of the European Parliament and of the Council amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts and Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC. The Czech legislation has applied wide range of changes incurred by amendment of the Act No 90/2003, Act on Auditors, that entered into force 1. 10. 2016. The aim of the article is to remind or to describe to a reader the issue of non-audit services provision by statutory auditors to the audited entities and to present changes which are caused by amending European legislation. A structure of the article is based on the articles' goals. Initial part of the article is aimed to provide the explanation of fundamental definitions which are essential for the following explanation of the whole issue. The subsequent part summarizes opinions of opponents and proponents of the non-audit services provision. The summary contains the most popular mathematic models of auditor's independence as well as comprehensive ethical and psychological models and arguments. The following part of the article presents the overview of changes, which were applied by amended EU legislation, practical instruction manual and the explanation of several unclear points. These should help to a reader to familiarize his behavior in the new environment.

The aim of the article is to analyze the internal and external rotation of auditors on the stock market of Prague Stock Exchange. The analysis is made between the years 2011 - 2015 and is based on a total of 107 annual reports of listed companies. The annual report must contain the auditor's report for the period. Rotation of auditors is recently frequent topic of international research because of the new European regulation of the audit market. Following these international research this article contains the analysis of the Czech capital market. Data shows that on the Czech capital market there are fairly frequent changes of audit firms and key audit partners due to the number of listed companies. The analysis also shows the growing influence of the Big 4 companies (KPMG, Deloitte, PwC and EY (Ernst & Young)) in the number of audits carried out.

In the introduction, the article summarizes legislative development in the area of the entry into the audit profession in the Czech Republic in the years 1993 - 2015 with particular emphasis on exams recognition of Chamber of Auditors of the Czech Republic in relation to other professional and educational institutions, especially in relation to public higher education institutions. In the following parts of the article, the history of the Chamber is mentioned, the examination system, its development and the rules for recognition of examinations passed in other professional and educational institutions are described in detail. The most significant organizations the Chamber cooperates closely with are described briefly. The article includes a short comparison of conditions of entry into the audit profession with other countries. In conclusion, the article analyzes if mitigation of the requirements for candidates for the audit profession has led to increase in attractiveness of the profession in the form of increase of the number of applications for exams recognition and the number of auditors registered by the Chamber, especially after the amendment to the Auditors Act 2009.

In the introduction, the article compares the legislation for foundations and foundation funds according to the law on foundations and foundation funds and the new Civil Code. The paper focuses mainly on the legislative changes in the field of auditing of foundations and foundation funds and on reporting of administrative costs in the annual reports. As far as the article is based on the empirical data of the beneficiaries of contributions from foundation investment fund, the foundation investment fund is also mentioned, and its role in financing of the foundations and foundation founds is described. The article comments on important areas of transparent management that are publication of annual reports and financial statements, restriction and control of administrative costs, publication of auditor's rewards and audit reports. Individual parts of the paper draw attention to the deficiencies in information reported.

The aim of this article is to find a multicriterial indicator of financial health of municipalities. Such an indicator should meet the need for a robustness and complexity to cover all the significant areas of activities of municipalities. It should be also understandable for key users of the information on financial situation of a municipality - for its citizens. This concept of its construction has been made using a literature search method in this field since 1960s and synthesis of its findings into 6 basic dimensions of such an indicator. Each of this 6 dimensions should allow a drill-down approach to get 2 - 3 partial aspects of that dimension. Also these should be evaluated separately.

The aim of this paper is to analyze transparency reports of auditors operating in the Czech audit market in terms of compliance with legal requirements to this report. Subsequently individual points of these reports are analyzed in detail focusing on deficiencies in these reports. The analysis is based on the 45 transparency reports issued for the accounting period ending no later than 31. 12. 2014. These data show that 80% of the auditors' compiled the transparency report exactly according to legal requirements. The maximum number of points required by law but not mentioned is six. Further, the analyzed data show that most deficiencies occur at a point that concerns about internal quality control. Overall analysis confirmed the comparatively high level extent to meet legal requirements on transparency report.

The article focuses on legislative regulation of the quality assurance system of audit services provided by auditors and audit firms operating in the Czech Republic, the Slovak Republic, Poland and Hungary. These countries form an alliance of states called the Visegrad Four (hereinafter also the V4), which was established on 1st February 1991 as the original Visegrad Three. The cooperation in terms of the auditing profession takes form of annual meetings of front representatives of audit chambers of these countries to address current issues in the field of auditing. The main part of the article illustrates how quality assurance system works in each country, of what quality the services provided by auditors are, what criteria supervisors use to measure quality and whether individual V4 states meet the requirements resulting from EU regulation. Last but not least, it provides an international comparison.

The assurance services are not standardized worldwide and there are used different frameworks. The most important frameworks are International standards prepared by IFAC and the standards used in the USA (US GAAS). The paper presents the research of different concepts of assurance services. There is analyzed the concept of assurance services according IFAC and US GAAS in the article. The definition of the particular services (assurance services - attest services - auditing) is discussed and there are proposal how to change the current definitions and the concept of assurance services. The prepared definitions could shed light on the principles of the individual services and can be used as a step for future research activities in area of standardization of assurance services.

This paper deals with professional liability of auditors seen from the perspective of criminal law of the Czech Republic. The introductory part discusses the essentials of criminal liability, analyses the term "criminal act" and other issues, particularly "fault": not only from the perspective of criminal liability of natural persons, but also from the perspective of criminal liability of corporations. Special attention is dedicated to participation in crime. Another part of the paper focuses on actus reus of certain types of criminal acts relating to auditing profession, e.g. the fraudulent data misrepresentation or the crime of issuing a false certificate or a report.

The New civil code in the Czech Republic re-implemented earnest into legislation. This article handles with this instrument - substance of earnest, its functions which are important for the decision on accounting treatment of earnest (proof, secure and penalize). Also distinction between earnest and a common prepayment (provision) and polemics on what could be the substance of an earnest have been made. A method of combining current actual resources with historical resources esp. from the 19th century has been chosen to comprise maximum knowledge and experience with earnest from that times because of lack of useful actual information. This kind of a comprehensive analysis is inevitable to describe all the possibilities and qualities important for the decision on accounting treatment, which means financial reporting of earnest in all its forms and with all its functions. That is the main goal of this article.

The supervision of the quality of auditors' activities in the Czech and Slovak Republic has developed in different directions even though the default Act of 1989 for this profession was identical. The Czech approach was more aimed at the restriction of undesirable behavior of auditors the Slovak approach focused more on the rectification. For further development of the supervision of quality in the Czech Republic, it would be particularly suitable more effective quality control of auditors. Furthermore, the experience of public-interest entities in which be included entities with a turnover or assets above a certain limit should be involved, including organizational units of foreign entities. The supervision of the quality of auditors' work in these entities should remain the restrictive one.

This paper deals with auditor's and tax advisor's duty of confidentiality. In the first part I define the auditor's duty of confidentiality, also in the context of legal regulation development concerning the auditor's profession. I go on to discuss aspects of breach of the duty to confidentiality and mention particular cases that are not considered to be the breach of the duty to confidentiality under the Act on Auditors. This is followed by defining the tax advisors' legal obligation to maintain the duty of confidentiality. The paper also focuses on the comparison between auditors' and tax advisors' duty of confidentiality and compares the relevant legal regulation itself. The third part discusses situations when the duty of confidentiality needs to be breached, i.e. in cases when criminal activity is being investigated; and is followed by brief notes concerning the development of the extent of duty of confidentiality.

This paper discusses the criminal liability of auditing companies which came into force in the legal system of the Czech Republic on 1 January 2012. It explains new principles of legal regulation concerning criminal liability of corporations and actions against them and it goes on to apply these principles to (unlawful) activity of auditing companies. This paper further offers an overview of potential sanctions that can be imposed on corporations (an auditing company) for unlawful conduct classified as a criminal offence. I also discuss the core of criminal liability of corporations, i.e., the question of culpability or, in other words, conduct of individuals that a corporation is subsequently held responsible for. I also provide an overview of some criminal cases concerning activity of auditing companies.

The series of corporate accounting scandals drew attention to the stewardship function of accounting. This exposition deals with the characteristics of accounting from perspective of institutional economic theory. I analyze relationship between owner and manager by the principal-agent model. This model helps us to reveal the causes which led to corporate scandals at the beginning of this millennium. As a reaction to these scandals, American Congress approved Sarbanes-Oxley Act. This act should help to protect investors by improving the accuracy and reliability of corporate disclosures.

Assurance services are services provided by auditors to reduce information asymmetry in agent/principal situation or in other situations when one party of transaction is able to gain less information then the other. Those services are regulated by International Standards on Auditing issued by International Auditing and Assurance Standard Board of IFAC and moreover audit of financial statements (as one of those services) is regulated by EU directive 2006/43/EC. There are some new and very serious requirements in this directive, e.g. public oversight, audit committee, rotation of audit partners, public interest entities, etc. In the second part of this article more technical aspects of auditors work are discussed (structure of ISA, recognition of assurance engagement under ISA etc.).