Audit of public interest entities (PIEs)

This article answers the following questions:

• What businesses are treated as public interest entities?
• What are the requirements to be met by audit firms auditing PIEs?

The audit of public interest entities (PIEs) is treated as a high-risk audit not without reason. More stringent legal requirements – for both the entities themselves and auditors – are due mostly to the fact that the data presented in the financial statements of these entities (as well as the information contained in the statutory auditor's report) may have a direct impact on share prices and are typically the only source of information about listed companies for smaller investors.

Statutory auditors dealing with PIEs face unique challenges

Public interest entities are – among others – issuers of securities admitted to trading on a regulated market, banks, branches of credit institutions, insurance undertakings, payment institutions which fulfil large enterprise criteria, and pension and investment funds.

Due to additional statutory and regulatory conditions which auditors auditing listed companies must comply with (and the fact that findings of such audits are addressed to a larger number of stakeholders), the audit of financial statements of such entities requires more extensive expertise and knowledge of the industry, thorough understanding of the functioning of capital markets, and, oftentimes, the necessity to engage additional specialists from other industries than accounting and finance. These are challenges that not every firm can rise to.

Auditors cooperating with public interest entities must remember that any shortcomings or omissions in performing their statutory duties may result in severe penalties imposed on them by the Polish Financial Supervision Authority (Polish: Komisja Nadzoru Finansowego – KNF) or the Polish Agency for Audit Oversight (Polish: Polska Agencja Nadzoru Audytowego – PANA). Consequences include the possibility of launching an inquiry, imposing a fine, and even revoking the statutory auditor's licence.

What do the regulations say about audit firms carrying out audits of PIEs in Poland?

Auditing public interest entities is not only more difficult, but also more strictly regulated. The law stipulates that audit firms providing such services should come under closer scrutiny and retain audit documents for a longer period of time, among other obligations. What also increases the burden are ambiguous regulations concerning prohibited services and the fee cap. In effect, a small number of firms decide to offer such services. 

The current list of audit firms carrying out statutory audits of PIEs are easily accessible via the website of the Polish Agency for Audit Oversight.

What services should be offered by a good audit firm?

Statutory auditors who engage in the audit of public interest entities have a large burden on their shoulders. Therefore, a lot of firms, despite having appropriate expertise and qualified staff, refuse to provide these services, instead focusing on other areas related to finance and financial reporting, which often require equally detailed knowledge, but are less strictly regulated. Assurance services are only the tip of the iceberg. While looking for a good audit firm, in addition to verifying its experience in auditing financial statements, it is worth checking other statutory auditor services offered by a particular provider.