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Expecting changes – new regulations for auditing firms and statutory auditors

On 11th August 2015 the Ministry of Finance made public its latest draft legislation guidelines to the amended Act on statutory auditors and their self-government, entities authorised to perform audits of financial statements and public supervision, as well as on other laws.

The amendment aims to adjust domestic law to the EU's new regulations on audits – the latter being introduced primarily in order to:

  • Enhance the independence and impartiality of statutory auditors and auditing firms;
  • Improve the quality of statutory audits;
  • Support public supervision.

Among the fundamental issues that have been selected by the Ministry of Finance for legislative revision, the following may be noted:

  • Introducing a proper definition of small and medium entities in order to keep the provisions consistent and to avoid possible doubts in interpretation;
  • Introducing a limit to auditing firms' fees for permissible services other than financial statement audits (non-audit services) provided to the reviewed client (i.e. "white list" services) – in relation to Public Interest Entities;
  • Obligation for Public Interest Entities to contract an auditing firm for a period of at least 2 years – applicable to those who are contracting their first statutory audit;
  • Obligatory rotation of your auditing firm of choice after 8 years of continuous involvement in audits of the given Public Interest Entity or quasi-PIE;
  • Obligatory rotation of your key statutory auditor after 4 years of performing statutory audits for the given Public Interest Entity.

Further, the new regulations will also introduce the term of "statutory audit", explain the terms of "financial review activities" and "key statutory auditor" in more detail, as well as change the definitions of "network", "Public Interest Entities" and "small and medium entities". The idea is also to have international auditing standards and Polish auditing standards.

There is certainly still some time left before the legislation guidelines are shaped into an actual law amendment. However, the main directions seem already defined and it is safe to assume that the objective is to focus on the quality of audits of PIEs.

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