The overview and scope of the statutory auditor's work in Poland
A statutory auditor is a person authorized to evaluate, among others, the annual financial statement. The profession itself is considered to be a profession of public trust. However, the road to become an expert auditor is long and arduous.
What does the statutory auditor do?
The role of the auditor is to increase the credibility of the analyzed entities by approving the accuracy of their financial data. According to the Act on Statutory Auditors, a statutory auditor in Poland is qualified to keep book account, render tax advisory services, conduct training in, among others, accounting and taxes, as well as be in charge of bankruptcy proceedings. What is more, a person with such qualifications can:
- assess a company transformation plan,
- audit EU projects and programs,
- provide economic and financial expertise and opinions.
It must be highlighted that the profession of a statutory auditor is burdened with considerable criminal, disciplinary and civil responsibility. It means that if the auditor’s opinion on a financial statement is factually incorrect, he or she might be subject to a fine, loss of their license, as well as face imprisonment of up to 2 years.
Cooperation with a statutory auditor is extremely crucial, especially during the process of the audit of financial statements. All in all, it is the statutory auditor who issues the opinion that the financial statement is consistent with the factual circumstances. Their opinion is of key importance in the process of establishing relationships with new partners and contractors or receive a subsidy.
How to become a statutory auditor?
In order to become a statutory auditor one:
- needs to enjoy full public rights and have full legal capacity,
- needs to be of impeccable reputation and, through their past and recent actions, including those during the qualification procedure, provide assurance that they will practice the occupation of statutory auditor in the proper manner,
- must not have a criminal record for a deliberate crime or a deliberate tax offence,
- must have completed a course of study at university level (the qualification procedure can be started during the course but one need to graduate in order to be granted the title) and know Polish,
- needs to complete an apprenticeship and/or training,
- needs to pass theoretical exams and the diploma exam,
- needs to take the oath of office.
The process to become a statutory auditor in the future should begin with the attempt at the qualification procedure. In that case, the first step involves filling in a personal data form and declaring the intent to take the statutory auditor exams. Next, a person must pay the initial fee which, as of today, is PLN 1000. Once our application is positively reviewed by the Examination Board, we receive an evidence number, access to the website of the Polish Chamber of Statutory Auditors and an individual account number to pay for the exams.
The next step is to take 10 written exams, each regarding a different aspect of the statutory auditor’s work. Exams are divided into 4 sessions:
Exam Session I:
- Theory and principles of accounting;
- Economy and internal monitoring.
Exam Session II:
- Law – civil law, labor law and social insurance law, companies law, bankruptcy law, restructuring law, laws regulating business activity;
- Tax law, p. 1;
- Finances and financial management.
Exam Session III:
- Tax law, p. 2;
- Financial accounting.
Exam Session IV:
- Financial statements and analyses thereof;
- Financial reviews and ethics.
Information on the range of subjects covered by a particular exam is publicly available. However, contrary to the tax advisor exam, the questions and tasks are not published and never the same. A person might take three attempts at the same exam and passed exams do not become void.
Upon taking the exams, one needs to:
- do a one-year internship within the scope of accounting, in a country of the European Union, and complete at least two years of training at an auditing company under the supervision of a statutory auditor, or
- complete three years of training at an auditing company under the supervision of a statutory auditor, or
- receive an exemption from the obligation to do an internship or complete a training when one has 15 years of professional experience in accounting, law, finances and financial reviews. However, such an exemption must be approved by the Examination Board.
Once the candidate passes all the exams and completes the mandatory training, he or she must take the diploma exam which consists of two parts: oral and written. The written part of the exam involves solving situational tasks that occurred during review of financial statements. Its premise is to check practical skills of the candidate in terms of using theoretical knowledge during audits of financial statements. The oral part of the exam requires answering three questions, including one regarding the solution proposed in the written part. The other two questions are about subjects related to the profession of statutory auditor, including ethical dilemmas.
Upon receiving a positive result of the diploma exam, the candidate must take the oath of office at the seat of the Polish Chamber of Statutory Auditors as well as submit a petition to the National Council of Statutory Auditors to be entered in to the register.
Audit of a financial statement carried out by a statutory auditor
The purpose of an audit of a financial statement is to improve the trustworthiness of entities in question, as well as to verify the accuracy of data presented in the statement against the actual situation of the audited company. It should be highlighted that the audit of a financial statement is in many cases mandatory but can also be voluntary. Any entity may voluntarily undergo an audit of its financial statement e.g., due to internal purposes, interests of investors or subsidiaries.
The obligation to undergo a mandatory audit of a financial statement is, above all, imposed on:
- domestic and foreign banks,
- insurance companies and their branch offices,
- branches of foreign investment firms,
- credit and savings unions,
- entities operating under regulations on public trading in securities,
- joint-stock companies, except for companies being a member of an organization as of the balance sheet date,
- entities operating under regulations on investment funds and pension funds,
- payment institutions and electronic money institutions,
- entities preparing financial statements based on the International Financial Reporting Standards,
- annual individual financial statements of sub-funds,
- annual combined statements of investment funds with separated sub-funds,
- financial statements of merging companies and newly established companies, prepared for the year in which the merger took place.
What is more, the obligation of audit of financial statements covers entities that met at least two of the following three conditions in the previous financial year:
- 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.
The audit of a financial statement covers its five main components, namely:
- the balance sheet,
- the profit and loss account,
- additional information covering the introduction to the financial statement and supplementary details and notes,
- the list of changes in equity,
- the cash flow statement.
It should be noted, however, that individual elements of the audit of a financial statement comprise, among others, of account statements, relevant accounting documentation and internal audits conducted at the entity. The picture below presents a detailed range of aspects covered by the audit of financial statements:
Source: J. Pfaff, Rewizja Finansowa, Wydawnictwo Uniwersytetu Ekonomicznego w Katowicach, Katowice, 2018, p. 75
In order undergo an audit of a financial statement, the obligated entity must choose an auditing company. The choice is made by the body that approves the financial statement of the entity. Once the auditing company has been selected, after conclusion of the agreement (concluded for two years) and provision of information, the auditing team begins the audit of the financial statement. It should be highlighted that such an audit is divided into two parts: preliminary audit and audit proper.
The preliminary audit is the first stage of the audit of a financial statement. Its purpose is to allow the statutory auditor familiarize themselves with the nature and structure of the audited entity, monitor the inventory process as well as assess the accounting system and internal control. The detailed audit, on the other hand, takes place after the preparation of the financial statement by the entity. As part of it, the statutory auditor verifies individual components of the statement, their correctness and compliance with records in the accounts and the factual circumstances at the entity.
During the last stage of the audit, the statutory auditor issues their opinion. The opinion on the financial statement is the last part of the audit and of the highest importance for the entity. Based on the collected evidence and information, the statutory auditor issues an opinion that constitutes the general evaluation of the credibility and reliability of the prepared financial statement compared to the factual circumstances of the entity. The opinion can be expressed as:
- an opinion without reservations,
- an opinion with a reservation or reservations,
- a negative opinion.
The statutory auditor may refuse to express an opinion and terminate the concluded agreement.
Both the audited company and the statutory auditor want the audit of the financial statement to go well and be conducted quickly and seamlessly. Such a goal can be achieved only by strictly cooperating with the auditor. The whole process will most certainly be shorter if the auditor is provided with necessary documents and answers to any questions. Such support will also increase the chances of receiving a positive opinion on the audit. One must remember that the statutory auditor is an independent person who issues an objective opinion on the statement of the entity.
Author: Karolina Stańczyk, Accountant at MDDP Outsourcing.
Sources:
The act of 11 May 2017 on statutory auditors, auditing companies and public supervision
Polish Chamber of Statutory Auditors – Information for candidates for statutory auditors
