Family Foundation Audit: what to check and how to prepare – a Statutory Auditor's perspective

A family foundation, introduced into the Polish legal system by the Family Foundation Act of 26 January 2023, is a specialised entity established to manage family wealth and achieve succession planning objectives. From the moment of its registration, it is required to maintain full accounting records in accordance with the Polish Accounting Act, without the simplifications available to certain public foundations. The complex structure of its assets, its specific tax regime and its close relationships with beneficiaries mean that a family foundation inherently requires particularly careful financial and legal oversight.

The legislator has addressed this challenge by introducing two separate, complementary oversight mechanisms: the mandatory family foundation audit under Articles 77–81 of the Family Foundation Act and the audit of financial statements conducted by a statutory auditor pursuant to Article 64 of the Accounting Act. These mechanisms differ in scope, purpose, and legal basis. Crucially, they cannot be performed by the same entity (Article 78 of the Family Foundation Act excludes from conducting the family foundation audit an audit firm that has provided statutory audit services to the same foundation, including an audit of its financial statements, as referred to in Article 2(7) of the Act on Statutory Auditors). In practice, foundations will generally need to appoint separate independent providers to perform these engagements.

What does the mandatory family foundation audit, conducted at least once every four years, cover?

Every family foundation, without exception, is subject to an audit under Article 77 of the Family Foundation Act at least once every four years. Its scope, as defined in Article 77(1), includes an assessment of the propriety, reliability and compliance with applicable law, the foundation's purpose and its governing documents in relation to:

• The management of the foundation's assets.
• The incurring and fulfilment of civil-law and commercial obligations.
• The incurring and fulfilment of public-law obligations, including tax and social insurance liabilities.

This scope is considerably broader than that of a financial statement audit, as it assesses the foundation's overall activities in terms of compliance with applicable law and its purpose.

The minimum frequency of once every four years may be increased by the foundation's statute or a resolution of the Assembly of Beneficiaries (the body of beneficiaries established under the Family Foundation Act).

When is a family foundation also subject to a mandatory financial statement audit?

If a family foundation reaches a scale of operations that triggers the statutory requirement to audit its financial statements, Article 79(2) of the Family Foundation Act requires the audit under Article 77 to be conducted annually, alongside the annual financial statement audit, by a separate entity.

The obligation to have the financial statements audited by a statutory auditor arises where, in the preceding financial year, the foundation met at least two of the following three criteria specified in Article 64(1)(4) of the Accounting Act:

1. Total balance sheet assets at the end of the financial year: at least EUR 3,125,000.
2. Net revenue from sales and financial operations: at least EUR 6,250,000.
3. Average annual employment: at least 50 employees.

Important: Most family foundations focused on passive wealth management, without employees or extensive operating activities, will not exceed these thresholds and will therefore not be subject to a mandatory annual financial statement audit. However, this does not exempt any foundation from the requirement to undergo a family foundation audit at least once every four years.

Legal classification of the audit – practical implications

An audit conducted under Article 77 of the Family Foundation Act is not an ordinary consulting service. It is an assurance engagement within the meaning of Article 2(5) of the Act on Statutory Auditors, involving an assessment of the foundation's activities and circumstances against criteria of legality, reliability and compliance with its purpose. The audit falls within a regulated category of assurance services requiring the participation of a statutory auditor.

This entails the obligation to apply the Polish National Standards on Auditing (KSB) and the Polish National Standards on Quality Management (KSKJ 1 and 2), compliance with the ethical and independence requirements applicable to statutory audit activities, and public oversight of the audit firm by the Polish Agency for Audit Oversight (PANA).

Who conducts the audit, and why does the choice of provider matter?

Article 77 of the Family Foundation Act provides for two organisational arrangements:

• An audit firm registered on the list maintained by PANA, with quality management systems compliant with KSKJ 1 and 2 and clearly assigned responsibility for the entire engagement.
• A team of auditors comprising a statutory auditor, a tax adviser and an advocate or legal counsel, appointed specifically for the engagement.

The Assembly of Beneficiaries makes the appointment by adopting a resolution.

Auditor independence should be maintained in relation to the foundation as a whole, including its management board, supervisory board, founder and beneficiaries. This follows by analogy from Part 4B of the ethical principles set out in the Handbook of the International Code of Ethics for Professional Accountants, adopted by Resolution No. 207/7a/2023 of the National Council of Statutory Auditors (KRBR) of 17 December 2023, which governs independence in assurance engagements other than audits of financial statements.

What does each specialist examine as part of the family foundation audit?

A family foundation audit is a multidimensional review in which each member of the audit team contributes their particular expertise:

• The statutory auditor assesses financial and accounting matters, including the accuracy of asset valuations and accounting records, consistency between the balance sheet and the register of contributed property, completeness of asset-related documentation and the reliability of records of benefits provided to beneficiaries.
• The tax adviser examines public-law obligations, including the accuracy of corporate income tax (CIT) settlements relating to benefits provided to beneficiaries, the identification of transactions classified as hidden profits, compliance with the permitted scope of activities under Article 5 of the Family Foundation Act, the timely submission of CIT-8FR returns, and the correct settlement of VAT, social insurance contributions (ZUS) and personal income tax (PIT) obligations in the foundation's capacity as a tax remitter.
• The advocate or legal counsel assesses compliance with applicable law and the foundation's statute, including the propriety of resolutions adopted by its governing bodies, adherence to internal procedures and the accuracy and currency of information recorded in the Register of Family Foundations and the Central Register of Beneficial Owners (CRBR).

What does a statutory auditor examine during a financial statement audit?

A financial statement audit is conducted in accordance with the Polish National Standards on Auditing (KSB), which implement the International Standards on Auditing (ISA).

The statutory auditor verifies the reliability and accuracy of the financial information presented in the financial statements, examining the following areas:

1. Balance sheet – assets: A family foundation may hold a complex portfolio of assets, including shares in companies, bonds, real estate and works of art. The statutory auditor verifies the valuation of each asset category in accordance with the adopted accounting policies, such as acquisition cost, the equity method or market value. The audit also covers the consistency of the balance sheet with the register of contributed property and supporting documentation, the accuracy of physical inventory procedures, the recoverability of receivables and cash balances confirmed directly by banks.
2. Balance sheet – equity and liabilities: The audit includes verification of the founding fund (minimum PLN 100,000) against the value of property contributed by the founder, the completeness of liabilities towards beneficiaries (benefits granted but not yet paid), public-law liabilities and provisions for risks.
3. Income statement: The statutory auditor examines revenue from permitted activities, administrative expenses and remuneration of the foundation's governing bodies, as well as the correct allocation of income and expenses to the appropriate reporting periods.
   Particular attention is paid to benefits provided to beneficiaries, including verification of their basis in the foundation's statute and resolutions adopted by its governing bodies, and the accuracy of their accounting treatment.
4. Notes to the financial statements: The audit covers the completeness of disclosures concerning accounting policies, related-party transactions, benefits paid to beneficiaries, remuneration of governing bodies, events after the balance sheet date and risks.
   Undisclosed related-party transactions or transactions conducted on non-arm's-length terms involving the founder, beneficiaries or companies related to them represent some of the most serious potential misstatements in a family foundation's financial statements.
5. Tax risks and the going concern assumption: Although the statutory auditor does not conduct a tax audit, they assess whether identified tax risks require the recognition of a provision or disclosure as a contingent liability. The statutory auditor must also assess the foundation's ability to continue as a going concern for at least 12 months from the balance sheet date.

Outcomes of both processes – form and circulation of documents

A financial statement audit concludes with an independent auditor's report containing the statutory auditor's opinion, which may take one of four forms:

• Unmodified opinion: an opinion without qualifications concerning the financial statements.
• Qualified opinion: an opinion expressing reservations about certain matters that do not result in a disclaimer of opinion.
• Adverse opinion: issued where the financial statements do not fairly present the foundation's financial position.
• Disclaimer of opinion: issued where very significant limitations on the scope of the audit prevent the auditor from expressing an opinion.

Any departure from an unmodified opinion is a signal requiring immediate attention from the management board.

An audit conducted under Article 77 of the Family Foundation Act concludes with a written audit report. The report should contain an assessment of each area covered by the audit, a description of identified irregularities and recommendations for addressing them.

The management board is required to present the report to the supervisory board or, where no supervisory board has been established, to the Assembly of Beneficiaries at its next meeting. The independent auditor's report on the financial statements follows the same reporting route.

Key responsibilities of the management board and beneficiaries

Powers and responsibilities of the management board

• Annual assessment of the financial statement audit requirement The management board, acting as the entity's management, assesses each year whether the foundation meets the criteria specified in Article 64(1)(4) of the Accounting Act that trigger the requirement for a mandatory financial statement audit. This assessment should be carried out sufficiently in advance before the end of the financial year.
• Monitoring audit deadlines The management board monitors the four-year audit cycle under Article 77 of the Family Foundation Act and initiates the process of appointing an audit provider through the Assembly of Beneficiaries in good time. Where the foundation is subject to a mandatory financial statement audit, the Article 77 audit becomes an annual requirement.
• Preparation of financial statements All members of the management board sign the financial statements, which must be prepared exclusively in electronic form (XML file) and signed using a qualified electronic signature, a trusted signature or a personal signature. The deadline is three months after the end of the financial year (for a financial year ending on 31 December 2025, the deadline was 31 March 2026).
• Entering into engagement agreements The management board enters into agreements with both entities selected by the Assembly of Beneficiaries: separately with the audit firm appointed to audit the financial statements and with the entity appointed to conduct the audit under Article 77 of the Family Foundation Act.
• Providing access to documentation The management board has an unconditional obligation to make all requested documents available to auditors and provide comprehensive explanations (Article 66(4) of the Accounting Act and Article 80 of the Family Foundation Act). Refusing or obstructing access constitutes a breach of the law and may give rise to personal liability for members of the management board.
• Filing documents with the register Following approval of the financial statements by the Assembly of Beneficiaries, the management board has 15 days to submit the following documents to the Regional Court in Piotrków Trybunalski: 

1. The financial statements (XML file and paper version).
2. The statutory auditor's report on the financial statements.
3. The minutes of the Assembly of Beneficiaries, including resolutions approving the financial statements and granting discharge to the relevant governing bodies.
4. Forms RFR-Z30 and RFR-ZN.

• Implementation of recommendations Recommendations contained in both the family foundation audit report and the independent auditor's report on the financial statements require implementation. Failure to take corrective action may give rise to objections or claims from beneficiaries or supervisory authorities.
• Consequences of non-compliance Failure to conduct a mandatory financial statement audit or an audit under Article 77 of the Family Foundation Act may result in:

1. A fine imposed on the entity's management.
2. The tax authorities questioning the credibility of the financial statements.
3. Refusal by the Assembly of Beneficiaries to approve the financial statements.
4. In extreme cases, the registration court initiating proceedings to dissolve the foundation.

Powers and responsibilities of beneficiaries

• Appointment of audit providers The Assembly of Beneficiaries appoints, by resolution, both the audit firm responsible for auditing the financial statements and the entity conducting the audit under Article 77 of the Family Foundation Act. Auditor independence must be verified as part of the selection process.
• Ad hoc audits The Assembly of Beneficiaries may adopt a resolution to commission an audit under Article 77 outside the regular four-year cycle, for example where there are justified concerns about the propriety of the management board's activities or circumstances arise that require immediate verification.
• Approval of financial statements and granting discharge The Assembly of Beneficiaries reviews and approves the annual financial statements and grants discharge to the foundation's governing bodies. Both decisions are informed by the financial statement audit findings and the family foundation audit report. Beneficiaries are entitled to access the complete contents of both documents, which the management board may not disclose selectively.
• Identification of matters requiring attention Beneficiaries may, and should, identify areas that warrant more detailed examination by the auditors.

The family foundation audit is a relatively new institution in Polish law, combining elements of financial auditing, compliance and governance oversight. The first mandatory audits of family foundations are due to take place in 2027.

From a statutory auditor's perspective, a foundation that systematically maintains its documentation, updates its list of beneficiaries, records benefits provided to them and verifies its tax compliance is prepared for an audit at any time. And being audit-ready means being prepared to manage family wealth responsibly for the benefit of beneficiaries across future generations.