3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

Large or medium-sized companies are always subject to mandatory external audit. Small companies must undergo external audit if they meet at least two of the following criteria: assets exceeding 40,000,000 CZK, net turnover exceeding 80,000,000 CZK, or an annual average of more than 50 employees. The purpose of publishing financial statements is to provide external users with accounting information, enabling them to analyze the financial health of the company. Accounting experts can check these statements for errors, intentional or otherwise, and identify any illegal activities, such as fraud, due to the intricate connections between financial statements. Investing in companies is inherently risky, and as such, external users, including investors, face significant risks. This is one of the reasons why companies are obliged to publish their financial statements. By making these financial statements available to the public, companies provide crucial information about their financial position, allowing external users to assess whether it is advisable to invest in or engage with the company, or conversely, to minimize their involvement. Entities that do not publish their financial statements deny external users the opportunity to analyze their financial position. This lack of transparency harms external users, as they can not verify the company’s financial position or identify any potential discrepancies in the financial statements. Furthermore, companies that do publish their financial statements are also negatively affected, as competitors can assess their financial position compared to those that do not publish. This information can then be used in the competitive landscape of business. 2. Methodology The primary aim of this article is to extend the original research conducted by our research team from 2015 to 2018. The original research focused on identifying companies in the Czech automotive industry showing indications of possible violation of the going concern assumption and the prudence principle. The basic population of companies used for the analysis contained 2,000 companies operating in automotive. These companies belonged to the most important suppliers of one significant car producer in the Czechia. Subsequently, we chose every 10 th firm from the population and created a research sample of 200 companies. During the analysis, we examined their financial statements reported for accounting periods 2011 to 2014. Based on our findings, we were able to analyse only 397 out of 800 financial statements of these companies. As is obvious, unfortunately, many companies did not fulfil their legal obligation and did not publish their financial statements in the Business Register in the Collection of Documents. Sometimes, some statements were not published by companies annually during selected years. (Horák, Bokšová et al., 2016) Subsequently, based on our research results, we identified total of 31 companies with negative equity that represented crucial signs of violence of the going concern assumption and the prudence principle. These companies represented highly risky business partners who may have faced insolvency proceedings or bankruptcy in the future. The data about these companies is reported in Table 1.

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