undersigning a contract

With the high inflation we are currently seeing in Poland, more and more entities are falling into the obligation to audit their financial statements. This is due to the fact that the amount thresholds (total assets, sales revenue) that determine the obligation to audit financial statements have not been changed for many years.

At the same time, the process of auditing financial statements is an important part of the economic ecosystem. The purpose of the audit is to verify that the financial statements fairly and clearly present the asset and financial position and financial result of the entity. During the audit, the auditor verifies that the statements are prepared in accordance with the provisions of the Accounting Act and the accounting policy adopted by the entity.

Entities covered by the mandatory audit

The Polish Accounting Act specifies that the annual consolidated financial statements of capital groups and the annual financial statements of – continuing operations are subject to audit:

  • domestic banks, branches of foreign banks, insurers and branches of foreign investment companies,
  • entities operating on the basis of regulations on trading in securities, regulations on investment funds, pension funds,
  • national payment institutions and electronic money institutions,
  • joint-stock companies,
  • other entities (primarily limited liability companies, general partnerships, partnerships, limited partnerships, civil partnerships, and enterprises of individuals) that met at least two of the following conditions in the preceding fiscal year for which the financial statements were prepared:
    • average annual FTE employment was at least 50 people,
    • total assets of the balance sheet at the end of the financial year were the equivalent in Polish currency of at least EUR 2,500,000,
    • net revenue from sales of goods and products and financial operations for the financial year was the equivalent in the Polish currency of at least EUR 5,000,000.

Other entities subject to mandatory audit

Also subject to audit are the financial statements of acquiring companies and newly formed companies, prepared for the fiscal year in which the merger took place.

In addition, the annual financial statements of entities prepared in accordance with IAS, the annual combined financial statements of investment funds with segregated sub-funds and the annual individual statements of sub-funds are subject to mandatory audit.

It is also mandatory to have their financial statements audited by those entities that keep books of account and have chosen the balance sheet method of determining exchange differences for tax purposes. This requirement does not derive from the Accounting Act, but from the provisions of the Income Tax Act.

It is worth noting that the shareholder/owner (the body that approves the financial statements) may make a voluntary decision to audit the financial statements. This solution is often used by multinational groups when local entities do not meet the criteria for mandatory audit of their financial statements.

Amount thresholds for the 2023 financial statement audit

The amounts determining the terms of the audit for other entities given in EUR should be converted into PLN at the average exchange rate announced by the National Bank of Poland, which is in effect on the last day of the fiscal year for which the report will be prepared. If the last day falls on a weekend, then the exchange rate for Friday applies. NBP exchange rates are published on the website www.nbp.pl.

With regard to the financial statements for 2023, these are subject to audit if for 2022 at least two of the following conditions are met:

  • Average annual FTE employment was at least 50 people,
  • Total balance sheet assets at the end of 2022 were equivalent to at least PLN 11,724,750 (EUR 2,500,000),
  • Net revenue from sales of goods and products and financial operations for 2022 was the equivalent of at least PLN 23,449,500 (EUR 5,000,000).

Selection of the auditor

The audit of the financial statements can be carried out only by a certified auditor (auditor). This person is obliged to maintain integrity, objectivity, diligence, as well as to maintain professional secrecy. The auditor must not have any relationship with the entity he audits.

The selection of the auditing firm to audit the financial statements shall be made by the body approving the entity’s financial statements, unless otherwise provided by the entity’s articles of incorporation, agreement or other binding legal regulations. The head of the entity may not make such a choice.

The head of the entity shall conclude an audit contract with the audit firm in time for the audit firm to participate in the inventory of significant assets. In the case of a mandatory audit, the first audit contract shall be concluded with the audit firm for a period of not less than two years, with the possibility of renewal for subsequent periods of at least two years. The costs of the audit of the financial statements shall be borne by the audited entity.

Powers and obligations of the auditor

The head of the audited entity shall provide the auditor with access to the books of account and the documents that form the basis for the entries made therein and any other documents, as well as provide comprehensive information, explanations and statements necessary for the preparation of the audit report.

The auditor shall be entitled to obtain information related to the course of the audit from the counterparties of the audited entity, including banks and its legal advisors, with the authorization of the head of the audited entity

Penalties for failure to audit

The head of an entity who serves on the board of directors is responsible for the correct preparation of the financial statements and the mandatory audit.

Persons who fail to comply with the obligation to have their financial statements audited are liable to a fine or restriction of liberty. The rules and amounts of the penalty are set forth in the provisions of the Criminal Code, and the court determines it based on the circumstances of the specific case.

Our support

The outcome and process of handling the audit depends on the quality of the financial statements prepared by the entity. Check out our accounting services or contact us directly. We are here to make running your business easier.

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