What is a statutory audit?
A statutory audit is an independent audit of financial statements required by law. Its purpose is to provide an external assessment of whether the financial statements have been prepared in accordance with the applicable financial reporting framework and whether they present a true and fair view of the entity’s financial position and performance.
In the European Union, the concept of a statutory audit is linked to the audit of annual or consolidated financial statements required by EU law or national law, in particular under Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts, as amended. In Poland, the obligation to have financial statements audited is regulated primarily by the Accounting Act, while the work of statutory auditors and audit firms is also governed by separate regulations concerning statutory auditors, audit firms, public oversight, independence and professional standards.
A statutory audit is performed by a licensed statutory auditor, usually acting through an authorised audit firm. The auditor does not manage the company, approve business decisions or replace the accounting function. The auditor’s role is to obtain sufficient appropriate audit evidence and issue an audit opinion and report. The opinion may confirm that the financial statements are prepared properly, but it may also be qualified, adverse, include an emphasis of matter or contain a disclaimer of opinion, depending on the findings.
What does a statutory audit involve?
A statutory audit normally covers the annual financial statements, and in certain cases also consolidated financial statements of a group. The audit includes examination of accounting records, selected transactions, internal controls relevant to financial reporting, estimates made by management, disclosures in the notes, going concern assumptions and compliance with the applicable accounting rules.
The auditor assesses material areas such as revenue recognition, receivables and impairment, inventories, provisions, liabilities, related-party transactions, financial instruments, taxes, equity changes and post-balance-sheet events. The exact scope depends on the entity’s business model, size, risk profile, sector and applicable reporting framework, such as Polish accounting rules, IFRS or other permitted standards.
A statutory audit is not the same as a tax audit, legal due diligence or forensic investigation. It does not guarantee that every error or irregularity will be detected. The audit provides reasonable assurance, not absolute certainty. This distinction is important for management boards, shareholders, lenders and investors, because the audit opinion should be understood in the context of the auditor’s statutory role and professional standards.
From a corporate perspective, a statutory audit may be relevant not only for annual reporting, but also for financing, investor relations, dividend planning, group reporting, mergers, acquisitions, restructuring or disputes between shareholders. Audited financial statements often support business credibility, but they also create formal responsibilities for the company’s management, supervisory bodies and owners.
When is a statutory audit required?
The obligation to conduct a statutory audit depends on the legal status of the entity, the type of activity conducted and, in many cases, statutory thresholds set out in accounting regulations. Certain entities are generally subject to mandatory audit because of their public interest, regulated activity or legal form, for example banks, insurance undertakings, investment funds and other regulated financial institutions. Other companies may become subject to audit after meeting criteria concerning their scale of operations, such as revenue, assets or employment, as specified in the applicable law.
Because audit obligations are jurisdiction-specific and may change, each case should be assessed against the current legal framework. For companies operating in Poland, this usually requires verification under the Accounting Act, regulations on statutory auditors and, where relevant, sector-specific rules or group reporting requirements.
Why legal support may be important in connection with a statutory audit
Although a statutory audit is performed by an auditor, legal issues often arise before, during and after the audit. These may concern the proper appointment of an audit firm, corporate approvals, compliance with independence rules, the division of responsibilities between management and supervisory bodies, disclosure obligations, approval of financial statements, filing deadlines and shareholder rights.
Legal advice may also be required when the auditor identifies irregularities, doubts about going concern, deficiencies in corporate documentation, related-party issues, potential management liability or circumstances affecting dividend distribution. In transactions, audited financial statements may influence purchase price mechanisms, representations and warranties, financing conditions or post-closing disputes.
Early consultation with a lawyer can help avoid procedural errors, corporate disputes, regulatory exposure and financial consequences. It is particularly important when audit findings affect management board duties, shareholder decisions, restructuring measures, financing documentation or potential liability of company officers.
Legal support in matters related to statutory audits
Support of a law firm in matters connected with statutory audits may include in particular:
- assessment of whether a company is subject to a statutory audit obligation,
- review of corporate procedures for appointing an audit firm,
- preparation of board resolutions, shareholder resolutions and supervisory body documentation,
- advice on approval and filing of financial statements,
- analysis of legal consequences of qualified audit opinions or identified irregularities,
- support in communication between the company, shareholders, auditors and supervisory bodies,
- legal assistance in disputes concerning financial reporting, dividends or management liability,
- transactional support where audited financial statements are relevant to an acquisition, financing or restructuring.
Need assistance with a statutory audit or its legal consequences? Contact us.
See also
- Financial reporting
- Board resolution
- Corporate tax
- Business acquisition