Accounting Intelligence: Year-end closing from a management perspective
After the end of the business year, the business entity must prepare its financial statements – in the manner prescribed by the Act on Accounting – supported by books kept in compliance with the relevant regulations and giving a true and fair view of the funds and the financial and earnings position of the entity. The rules of the closing of accounting are defined in the Act on Accounting but, of course, the detailed closing procedure has to be developed and regulated by the entity in the accounting policy.
Compliance with the rules of documentation and accounting discipline requirements defined in the Act on Accounting is always the responsibility of the manager/management. In the preparation of the financial statements, the provisions of the Act on Accounting and the accounting principles must be observed or caused to be observed completely, which is also the responsibility of the manager/management of the business entity. The rules of accounting documentation must be followed during the closing of the business year also as the closing process must be properly documented. Appropriate documents must be prepared of the business events and operations entered into the accounting records and documents must be processed comprehensively.
The regulatory environment – similarly to the economic environment – is changing constantly. Business entities must keep track of the changes as they influence their accounting decisions. The changes will/may also bring new tasks in the closing process. The managers of the entity – as the persons having liability for its operation – very often fail to modify the accounting policy accordingly. In case of changes in regulations, the modifications have to be integrated in the accounting policy within 90 days.
The parts of the financial statements prepared during the closing of accounting must be signed by the person/persons authorized to represent the entity indicating the place and the date as the authenticity of accounting documents must be attested by the signature(s) of these person(s). Since 2008, the liability of the manager/management for the preparation and disclosure of financial records has been much greater. In line with the requirements of Directive 2006/46/EC, from 2008 the Act on Accounting provides that within the main governing (controlling) body, the body of business management and the body of supervision of the business entity – each acting in the authority assigned to them by the relevant special regulations – the members of the business entities are jointly responsible for the compilation and disclosure of the financial statements defined in the Act on Accounting in compliance with the provisions of the Act. (This obligation also applies if the business entity prepares a consolidated annual report in accordance with the International Accounting Standards – in line with the provisions of the Act on Accounting.)
The entity must ensure the compliance of the financial statements with the relevant legal regulations and the persons authorized to manage the entity are liable for this. Based on the Company Act, senior officials of a business entity have joint and several and unlimited liability for non-compliance with the relevant regulations of the compilation and disclosure of the financial statements prescribed in the Act on Accounting.
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