Who is going to audit Public Interest Entities?

Monika SKÓRKA
Audit Partner at RSM Poland

An audit of public interest entities (PIE) is regarded as a high-risk audit not without reason. The higher requirements – which must be met by the audited companies, as well as their auditors – mainly arise from the fact that information in financial statements and in reports of an expert auditor may directly translate into share prices and, for smaller investors, is often the only source of data about a listed company.

Due to additional statutory requirements and regulations for listed companies’ auditors, as well as the fact that the audit results reach a larger number of stakeholders, audits of these entities require broader expertise and trade knowledge, familiarity with the way capital markets operate, and – oftentimes – the involvement of specialists outside of accounting and finance. Not everyone is up to the task. Moreover, in 2017 new regulations came into effect which introduced, among other things, a list of banned services which an auditor cannot render to an audited entity (e.g. tax advisory services, trainings). These circumstances have led over the last – most visibly, two years - to a decline in the number of auditing firms which were interested in cooperation with public interest entities, which in turn has halted the negative trend of declining prices in the business, which has lasted for the last 10 years.

Conversely, auditors who work with public interest entities must bear in mind that defects and omissions with regard to the execution of statutory tasks may result in heavy penalties – starting from explanatory proceedings, through fines, to the deletion from the register of expert auditors – imposed by the Financial Supervision Authority or the Polish Audit Supervision Agency (PANA), the new supervisor of the auditing market.

The Agency was supposed to be fully operational and perform its supervisory tasks starting from 1 January, 2020; however, the composition of its management is yet to be announced. We can only remain hopeful that this is nothing more than a rough start.