Starý Smokovec – 26 May 2011 Petr Šobotník – President KAČR

1. Starý Smokovec – 26 May 2011Petr Šobotník – President KAČR Czech Audit Market Latest Development

2. Czech Auditors – Age structure

3. Czech Auditors – Age Structure • New auditors only exceptionally start as sole practitioners • 80 % of auditors in category 31 – 40 are employed • Sole practitioners only dominate in categories over 70 (85%) and 60 – 70 (60%) • Number of auditors stabilized – new auditors replace older generation (turnover about 40 annually)

4. Size of the Czech Market • Variable component – 0,45 % of audit and audit related revenues • Budgeted amount for 2011 – CZK 18,400 th. • Total assurance fees (18 400 / 0,0045) = CZK 4,1 bn.

5. Size of the Czech Market • Payments from auditors form 75% of Chamber income • Structure of payments is as follows (CZK th.)

6. Size of the Czech Market • Fixed contributions amount for 40% of fees paid – stabilised • Variables – change in trend – after several years of growth – 2010 is the first year of decline • Big 4 dominates in variables – 70% of all variables paid by firms • Nr.5 generates only 30 % of income of Nr.4

7. New Act on Auditors - Leadership • Annual meeting – once in 2 years time • Chamber board – 17 → 14 • 7 members elected for 4 years; 7 for 2 years (Annual Meeting – November 2010) • Presidium – 3 members (President + 2 VP) • 1st vice-president – Doc. Mejzlík (VŠE Praha) • 2nd vice-president Ing. Ficbauer (also member of RVDA)

8. New Act on Auditors - Leadership • Composition of Board • 6 members – Big 4 • 2 members – small firms (ex Big 4) • 3 members – Academicians • 2 members – small firms • 1 member – sole practitioner • Supervision + Sanction Committees – no changes (elected for 4 years)

9. New Act On Auditors–Admittance to Profession • Significant liberalisation • Acceptance of various exams under given conditions increased interest to admittance • Up to 7 exams (12 in total) – VŠE • Up to 6 exams (12 in total) - ACCA • Oral exam no longer in place – hot topic • (7+3) concept to be replaced by (5+5) concept • Number of years – exams recognised • Number of years – exams to be completed • Bachelor level sufficient – again hot topic • Appeal to Public Oversight possible

10. New Act on Auditors – Public Oversight Supervising role • RVDA (Czech POB) • 2 years of experience in place • supervising and appealing role namely • Presidium (6 members) in charge with 2/4/6 years of mandate • first rotation (2 members) in May 2011 • nominations made by Ministry of Finance (in agreement with Czech National Bank) • Nominations proposed by various institutions (MF, CNB, Chamber of Trade, Industry Chamber, Academicians, KACR)

11. New Act on Auditors – Public Oversight Supervising role • Supervising role closely linked to quality control inspection programme • Inspections performed namely by inspectors employed by Chamber plus auditors elected into Supervision Committee • Number of inspections growing • 2009 – 148 • 2010 - 191

12. New Act on Auditors – Public Oversight Supervising role • RVDA quality control commitee thoroughly supervises the whole process • Chamber must submit to RVDA performance report semiannually • Historically – not all auditors inspected • Everyone must be inspected by end of 2013 • Inspections rating A-B-C-D • D result – disciplinary proceedings obligatory • C result – disciplinary proceedings possible • Size of penalties is a topic • Both 2009 and 2010 – penalties in a range CZK 500 th. – 600 th. collected in total

13. New Act on Auditors – Public Oversight Supervising role • Auditors of PIE inspected every 3 years; others every 6 years • C,D result – inspection in period of 2 years to be repeated • Quality in centre of inspections • Special focus on auditors of public interest entities • Role of auditors closely monitored by public - examples

14. Czech Audit Market Questions ? Interested more? Attend Prague International Conference (10 -11 October 2011)