Control systems in financial statements preparation process

The objective of the internal control system is to support decision processes which contribute to ensuring the following: the Bank’s effectiveness and efficiency, reliability of its financial reporting and the compliance of Bank’s operations with binding laws and internal regulations, and regulatory recommendations and standards adopted in the Bank's market standards. Within the system of internal control the Bank identifies risk: connected with every operation, transaction, product and process, resulting from the organizational structure of the Bank and the Group.

Within internal control system, the Bank distinguishes:

  • control function with the task of ensuring that the control mechanisms relating in particular to risk management at the Bank, which includes all the Bank's organizational units (unit), and organizational units (cell), and positions within them responsible for implementing the tasks assigned to this function,
  • compliance organizational unit, which aim it is, in cooperation with Bank’s departments and units, to identify, evaluate, control and monitor the risk that Bank’s operations do not comply with the generally applicable laws, the Bank's internal regulations, adopted by the Bank market standards and to submit reports in this regard,
  • an independent internal audit organization unit with the task of independently and objectively test and evaluate the adequacy and effectiveness of risk management and internal control system, with the exception of the internal audit unit

Control function is realized by functional internal control, i.e. activities carried out continuously, consisting of checking activities performed by all employees of the Bank, including their use of control mechanisms to ensure the compliance of operations with the applicable laws and internal regulations of the Bank and current responding to irregularities. All employees of the Bank are responsible for making checks and proper performance of duties, and apply control mechanisms within scope of their duties and tasks resulting from the internal regulations of the Bank.

Managers who control departments and units responsible for creating drafts of internal regulations of the Bank ensure their compliance with the applicable laws and Bank’s internal regulations, while the departments’ and units’ staff are required to comply with the generally applicable laws and internal regulations of the Bank and perform assigned tasks in accordance with these regulations. The internal regulations of the Bank are verified in terms of possibility of generating the risk of non-compliance by the compliance unit. Verification is performed i.e. based on the analysis of generally applicable laws, standards of conduct adopted in the banking environment, minutes of financial regulators and other authorities.

Internal audit constitutes an independent and objective activity characterized by inspection and advisory tasks consisting systematic and carried out in an orderly manner assessment of the relevant processes and identifying course of action affecting improvement of quality and effectiveness of the Bank. Both use of control mechanisms by employees of the Bank and compliance of the activity in departments and units to the generally applicable laws, the Bank's internal regulations and market standards adopted by the Bank's, is checked in the course of internal audits.

In order to ensure the accuracy and correctness of preparation of financial statements, the Bank designed and implemented a number of control mechanisms built into the functionality of reporting systems and internal regulations concerning this process. These mechanisms involve among others the use of a continuous verification and reconciliation of reporting data with accounts, analytical data and other documents which are the basis for preparing financial statements as well as with applicable regulations in the field of accounting policies and financial reporting.

The process of financial statements preparing is periodically subjected to a multi-functional internal control, in particular with regard to the correctness of the accounting arrangements, substantive analysis and reliability of the information. According to the internal regulations, financial statements are accepted by the Board of PKO Bank Polski SA and the Audit Committee of the Supervisory Board appointed by the Supervisory Board of PKO Bank Polski SA in 2006.

The tasks of the Audit Committee of the Supervisory Board i.e. monitoring the financial reporting process including the review of individual and consolidated interim and annual financial statements, with particular emphasis on:

  • information on substantial changes in accounting and reporting policy and how to make significant for the financial reporting estimates and judgments of management, as well as the compliance of the financial reporting process with the applicable law,
  • significant adjustments resulting from the audit and the auditor's opinion on the audit of financial statements, discuss any problems, concerns and doubts resulting from the audit of financial statements and analysis of the external auditor's recommendations addressed to the Management Board and the response of the Management Board in this regard.

Description of cooperation between the Audit Committee and the external auditor and its assessment is drawn up in the annual report on the activities of the Audit Committee annexed to the report of the Supervisory Board on the activities of that body.

Entity authorised to audit financial statements

In accordance with the Resolutions of the Supervisory Board (final of 29 January 2014) on the rules for selecting an auditor, PKO Bank Polski SA applies the rule according to which it is assumed that:

  • the maximum period of uninterrupted cooperation with the same audit company is 6 years. Starting from the cooperation period covering audit of the financial statements for years 2015-2017, the maximum cooperation period is 5 years,
  • contracts for audit and review of the financial statements are concluded for the maximum period of 3 years,
  • an audit company may perform an audit of the financial statements again after the period of at least 3 years.

On 11 March 2015 the Supervisory Board of PKO Bank Polski SA selected KPMG Audyt Spółka z ograniczoną odpowiedzialnością spółka komandytowa as an entity authorized to audit the financial statements of PKO Bank Polski SA and consolidated financial statements of the PKO SA Group. KPMG Audyt Spółka z ograniczoną odpowiedzialnością spółka komandytowa with its registered office in Warsaw, ul. Inflancka 4a is entered in the list of entities authorized to audit financial statements run by the National Council of Statutory Auditors under the number 3546. The choice of the entity authorized to audit and review financial statements was made by the Supervisory Board in accordance with applicable regulations and professional standards, on the basis of § 15 p.1 pt.3 of the Articles of Association of the Bank.

On 10 April 2015, PKO Bank Polski SA and the entity authorized to audit financial statements KPMG Audyt Spółka z ograniczoną odpowiedzialnością spółka komandytowa concluded an agreement for audit and review of financial statements of the Bank and the PKO Bank Polski SA Group for years 2015-2016.

The total amount of net fees for KPMG Audyt Sp. z o.o. Sp.k for audit of the financial statements and the consolidated financial statements of PKO Bank Polski SA Group in 2015 amounted to PLN 1 250 thousand. Fees for assurance services, including the review of financial statements amounted in 2015 PLN 974 thousand. Net fee for other services in 2015 amounted to PLN 34 thousand.

Additionally, in 2015 the previous auditor of PKO Bank Polski SA - PricewaterhouseCoopers Sp. z o.o. was paid net fee for assurance services, including the review of financial statements in the amount of PLN 1 045 thousand.

In 2014, PricewaterhouseCoopers Sp. z o.o. was the entity authorized to audit the financial statements of PKO Bank Polski SA. The total amount of net fees for PricewaterhouseCoopers Sp. z o.o. for auditing of the financial statements and the consolidated financial statements of PKO Bank Polski SA amounted to PLN 1 540 thousand. Fees for assurance services, including the review of financial statements amounted to PLN 2568 thousand. The amount of the remaining net fees paid to PricewaterhouseCoopers Sp. z o.o. amounted to PLN 1 787 thousand for tax advisory services and PLN 810 thousand for other services.