Audit of financial statements – basic information
Audit of financial statements in Poland – what is its purpose?
The purpose of the audit of financial statements has been defined in Article 65(1) of the polish Accounting Act of 29 September 1994. The auditor has to express a written opinion (together with a supplementary report) on whether the financial statements audited by him comply with the accounting principles and give a true presentation of the net worth, the financial position and the profit (loss) of the audited entity.
Therefore, in each audit of the financial statements, the auditor has to assess, firstly, whether the financial statements and the books of account on which they are based are free from irregularities resulting from the omittance or distortion of significant information, and, secondly, whether the information included in these financial statements can be considered true and fair.
The audit of financial statements is, therefore, a process whose task is to make credible the information (mainly financial information) contained in the financial statements. Thus, its purpose is to ensure the security of business trading.
Audit of financial statements in Poland – who is obliged to commission it?
According to the applicable regulations (Article 64(1) of the Accounting Act), the following entities are obliged to have their financial statements audited:
1) banks, insurers and insurance companies, co-operative savings and credit banks;
2) entities which operate on the basis of regulations on trading in securities and regulations on investment funds, and entities which operate on the basis of regulations on the organisation and operations of pension funds;
3) joint-stock companies, except for companies in organisation as at the balance sheet date;
4) all other entities which in the prior financial year for which the financial statements were prepared, met at least two of the following conditions:
- the annual average number of employees in full-time equivalents amounted to at least 50;
- the total assets as at the end of the financial year were at least the Polish zloty equivalent of EUR 2,500,000;
- the net revenue from the sales of merchandise and finished goods and the financial transactions for the financial year was at least the Polish zloty equivalent of EUR 5,000,000;
Subject to the audit requirement are also the financial statements of acquiring companies and newly-formed companies, prepared for the financial year in which the business combination took place, as well as the annual financial statements prepared in accordance with IAS.
Audit of financial statements in Poland – who should commission it and why?
Each entity may commission the audit of its financial statements. The essence of the audit should not lie in the search for those guilty of errors but in the opportunity to improve the operations of an entity. The auditor checks the compliance of the documentation with the facts and examines the entity's accounting and reporting procedures. Next, before issuing the opinion, he recommends the necessary changes and helps to find solutions to the problems he has identified. Therefore, it pays off to commission the audit of the financial statements. Firstly, the audit confirms the correctness of the reported data (prepared both internally and externally). Secondly, the activities of the auditor aim to verify the internal control procedures implemented in an entity. The list of detected errors and irregularities of the accounting system increasing the risk of conducting business and recommendations included in each professional audit of the financial statements are valuable information that can be effectively used by the entity managers. Thirdly, a positive opinion issued by an auditor confirms the credibility of the company and works to the company's advantage when the company is trying to obtain external finance.