The obligatory audit of a financial statement by a statutory auditor in Poland

The purpose of a financial statement is to reflect the financial and economic situation of an entity in a particular period. The entities obligated to carry out an annual financial audit have been indicated in the Accounting Act. The audit of a financial statement by a statutory auditor involves verification of correctness of the drawn-up document as well as the accuracy of data disclosed in it. The premise is to increase the trustworthiness towards the financial statement. Recipients of the presented information include, among others, the investors, lenders, governments and government agencies as well as customers. They use the data included in the statement to make economic decisions regarding that particular entity.

Which entities must undergo audits by a statutory auditor?

In order to learn whether a particular company should be subject to the obligatory audit by a statutory auditor, one should refer to Art. 64 section 1 of the Polish Accounting Act. Pursuant to regulations, the obligatory audit must be carried out in case of consolidated financial statements of capital groups and annual financial statements of entities that continue their operations, such as:

• domestic banks, branches of credit institutions, branches of foreign banks, insurance companies, reinsurance undertakings, main headquarters and branch offices of insurance companies, main headquarters and branch offices of reinsurance undertakings, as well as branches of foreign investment companies,
• cooperative credit and savings unions,
• entities operating under regulations on trading in securities, regulations on investment funds and management of alternative investment funds, and entities specified in Art 2 section 2b,
• entities operating under regulations on organization and functioning of pension funds,
• national payment institutions and institutions of electronic money,
• joint-stock companies, except for companies being a member of an organization as of the balance sheet date.

The obligation to carry out audits of financial statements also applies to other entities, above all: limited liability companies, general partnerships, partner companies, civil law partnerships, limited partnerships or natural persons that conduct economic activity that in the previous financial year (in the case of preparing a financial statement for year 2021, the reference year will be 2020) met at least two of the following conditions:

• the average annual employment in full time equivalent units amounted at least 50 persons,
• the total of balance sheet assets at the end of the financial year amounted the equivalent in PLN of at least EUR 2,500,000,
• the net revenue on sales of goods and products and on financial operations for the financial year amounted the equivalent in PLN of at least EUR 5,000,000.

Verification of a financial statement

The above-mentioned values are converted into PLN based on the average exchange rate announced by the National Bank of Poland (NBP) as of the balance sheet date. If we want to check whether the financial statement being prepared for 2021, in which the financial year complies with the calendar year, will be covered by the obligatory financial audit by an auditing company, we must use the average exchange rate announced by the National Bank of Poland as of 31 December 2020 – 4.6148 PLN/EUR. In the said case, the thresholds look as follows:

• EUR 2,500,000 x 4.6148 PLN/EUR = PLN 11,537,000 (total of balance sheet assets at the end of the financial year),
• EUR 5,000,000 x 4.6148 PLN/EUR = PLN 23,074,000 (net revenue on sales of goods and products and on financial operations for the financial year).

Apart from the above, the obligatory audit applies to financial statements of merging companies and newly established companies prepared for the financial year in which the merger took place, as well as annual financial statements of entities prepared in accordance with IAS (Art. 64 section 3 of the Polish Accounting Act).

What is more, taxpayers who keep accounting ledgers and determine exchange rate differences based on accounting regulations are obligated to have their financial statements audited by a statutory auditor. The said method must be used at least for three years. Starting from the fiscal year in which the method was used for the first time, the taxpayer is obligated to undergo audits of statements (Art. 14b section 2 of the act on personal income tax and Art. 9b section 1 point 2 of the act on corporate income tax).

Public benefit organizations – are they subject to audits of financial statements?

In the case of public benefit organizations, even if they do not meet the above-mentioned criteria of the accounting act, they are subject to an additional regulation issued by the Minister of Finance of 13.11.2018 on obligatory audits of financial statements of public benefit organizations. The said regulation specifies the conditions under which organizations are obligated to undergo financial audits even if they do not meet the thresholds provided for in the Polish Accounting Act. Such organizations are subject to an obligatory audit if they realize outsourced public tasks as tasks entrusted for performance or to support the public task and, in the financial year, they received total subsidies for the realization in the amount of at least PLN 100,000 and generated a revenue in the financial year for the amount of at least PLN 3,000,000. When the organization met the specified conditions in the previous year, it must undergo an obligatory audit.

Author: Paulina Kisiel, Senior Assistant of the Accounting Department at MDDP Outsourcing.

Sources:

Accounting Act of 29 September 1994

Act of 26 July 1991 on personal income tax

Act of 15 February 1992 on corporate income tax

See more:

Signing and submission of financial statements in XML format to the National Court Register

The audit of the financial statement for 2021 – selection of auditor