It can be considered that the auditors have become the favourites of the legislator and the market regulator. It is them who are increasingly under new control in respect of money laundering or anti-corruption control. This does not always have much to do with audit control, reliability and, most importantly, regularity. The new audit office introduced by the amendment of the Act will not only take away part of their powers, but can also significantly increase the prices of their services.
12 June 2019 The Sejm carried out first reading the draft amendment to the Act on statutory auditors. The main objective of the changes introduced, according to the project's justification, is "to strengthen public oversight of the activities of auditors and audit firms in Poland".
The main purpose of this is to introduce a new audit authority, the Polish Audit Supervisory Agency (hereinafter: PANA), which is to replace the currently functioning Audit Supervisory Commission (hereinafter: KNA).
This will take place only one year after the Commission's activities, established by the Act on statutory auditors, audit firms, and public oversight of 11 May 2017
The new office is to take over not only the role of KNA, but also part of the powers of the Polish Chamber of Auditors
Polish Agency for Audit Supervision - tasks of the new agency
The new office is to take over not only the role of KNA, but also part of the powers of the Polish Chamber of Auditors (hereinafter: PIBR). In the explanatory memorandum, the legislator points out that the public oversight activities undertaken so far have been carried out in a way that is far from satisfactory.
Among the main drawbacks are the delay in the implementation of the KNA control plans (mainly due to the lack of complementation of teams of auditors with appropriate experience in the assumed composition), as well as the chronicity of proceedings conducted by the National Disciplinary Ombudsman and the National Disciplinary Court, or PIBR bodies.
The legislator assumes that one the audit body for statutory auditor services will significantly improve the quality of those audits. The activities of the supervisory authority in the form of a state-owned legal person will also allow for greater flexibility in setting working conditions and wages, which will increase the possibility of obtaining a properly qualified staff. This is an extremely ambitious assumption in view of the situations of all kinds of specialists in state offices.
Another of the objectives of the project is to grant very broad powers to the PANA, i.e. to carry out physical checks, in respect of all services covered by the standards of profession provided by audit firms, i.e. not only regarding financial audit, but also the certification and related services.
This will be at the expense of limiting such powers on the part of PIBR, leaving it with the power to establish national standards for the pursuit of a profession; national standards for quality control; the principles of professional ethics and control are fulfilled by statutory auditors in the field of mandatory self-improvement, as well as in the performance of tasks relating to the registration and approval of statutory auditors.
It is assumed that full functionality of the Agency should be achieved in 2020
Doubts Around the PANA
The method of financing the new Agency also raises doubts. The project shows that these will be fees for supervision from audit firms, fees for listing audit firms and other revenues. The proposed rules also provide for the possibility of financing the agency’s activities from a state budget grant.
Audit firms will pay a supervisory fee for the calendar year at a rate of interest per calendar year and annual revenue for certification services and related services carried out in accordance with national standards of profession respectively, but not less than 20% average salary, or revenue from statutory audits carried out in the territory of Poland.
The percentage applicable for the calendar year concerned shall not be higher than 4%. The Act now assumes that this rate may not be higher than 5.5%. However, this does not mean reducing the burden on audit firms as the supervisory fee base has been extended.
The increase in fees can heavily burden audit firms, which can ultimately result in an increase, not so low, of the prices of their services.
Doubts about the charge were also raised by the Office for Competition and Consumer Protection, which asked for additional clarifications as to whether these changes would limit competition in the market for financial audit services and whether the increase in expenditure would not have a negative impact on small and medium-sized enterprises.
It is also worth noting that the planned PANA budget is two twice the total supervisory fees currently charged by KNA and PIBR.
Another source of PANA's revenues is also expected to be fees for entry on the list of auditors, which will increase from 2,000 to 5,000 PLN, or 150%
It is difficult to judge whether, and possibly what, the consequences for audit firms and their clients will result in the establishment of a PANA. The project has not yet been approved and it is not possible to predict what shape it will ultimately be.
This is to be ensured by the newly appointed representative of the Minister of Finance for the organisation of the Polish Agency for Audit Supervision, Mr Justyna Adamczyk. Should a new body be established, it is hoped that its usefulness will last longer than one year.
source: https://www.forbes.pl/opinie/nowelizacja-ustawy-o-bieglych-rewidentach-co-zaklada/xs5xjpe
Author:
Andrzej Dmowski
Lawyer and Doctor of Legal Sciences of the University of Warsaw. From 2011 one from Managing Partners in Russell Bedford Poland. Previously on the BDO advisory network, as well as Deloitte & Touche. Author of the book “Transfer Prices”, co-author of the commentary “The Corporate Income Tax Act”, author of many publications on tax law.