Recommendations on the operation of audit committees have been issued by Poland's Financial Supervision Authority (KNF).

The recommendations are a statement of good practice based on international standards, guidelines of international organisations as well as knowledge and experience of audit companies.

The recommendations do not add to an audit committee's statutory duties but are merely intended to facilitate the work of its members. For example, they include a list of several dozen example questions to which the audit committee should seek answers as part of its supervisory process.

An audit committee's monitoring role has to cover four key areas:

  • financial reporting and accounting
  • the efficiency of internal control, internal audit and risk management systems
  • the performance of financial reviews
  • the independence of external auditors and other bodies authorised to audit financial statements

Financial reporting and accounting

KNF recommends that this includes ensuring the reliability of information and paying particular attention to the methods used when settling significant or atypical transactions, especially if there are several possible methods of recording them.

The efficiency of internal control, internal audit and risk management systems

KNF emphasises the importance of effective supervision of internal control systems and the approval of the following year's audit plan. It also recommends that audit committees support the internal audit function, highlighting the importance of ensuring that it occupies the right place within the company's organisational structure. The audit department should report directly to the audit committee, and be subordinate to the president of the management board with the organisation structure.

The performance of financial reviews

KNF recommends holding meetings with the external and internal auditors without any management present to discuss the audit scope and procedure and analysing unresolved comments and questions. They should also discuss the need for cooperation with management members as well as any problems in their dealings with them, such as unjustified delays in giving consent to start an audit or in handing over documents or information requested.

The independence of expert auditors and other bodies authorised to audit financial statements

KNF recommends that the audit committee's duties should include making recommendations to the relevant authorities about organisations authorised to audit financial statements, conducting financial reviews and approving all audit and non-audit services provided by those authorised to audit financial statements and by other organisations.

Since 6 December 2009, audit committees have been mandatory for companies that are listed or conduct brokerage activities. In companies with a supervisory board of 5 or fewer members, the duties of the audit committee may be given to the supervisory board by shareholders' resolution in general meeting or by authorisation in the statutes.

By law, audit committees are required to:

  • meet at least four times per (accounting) year
  • operate in accordance with rules approved by the supervisory board or shareholders in general meeting, which should cover retention of members and scope of liability, amongst other things
  • draft a report dealing with their risk assessment of the areas and processes being supervised, the actions undertaken and their results.

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The original publication date for this article was 04/01/2011.