Principles for carrying out audits under the Act on freedom of economic activity
Economic activity conducted by entrepreneurs is subject to public control under Chapter 5 of the Act on Freedom of Economic Activity. Local authorities such as the mayor of the municipality, town or city president may, if it is observed that the economic activity is conducted in contravention of the provisions of the law or life or health-threatening or leads to substantial damage to property or to environment are obliged to notify of these circumstances to the competent public authority. If notification is not possible, the head of the local authority, the mayor or city president may order, by way of a decision, suspension of business activities for the time necessary, although not longer than 3 days.
In addition to the general powers of the bodies mentioned above, notified of the irregularities in the conduct of business activities, the scope of checks lies with the authorities granting licences for carrying out certain activities. In accordance with Article 57(1) of the Act under examination can be:
- compliance of activities performed with the licence granted,
- compliance with the conditions for the exercise of an economic activity,
- defence or security of the State, protection of citizen security and their personal rights.
Initiation of an audit
The control authority shall notify an entrepreneur of its intention to initiate audit, however, there is no obligation to notify it in cases where:
- audit shall be carried out on the basis of a directly applicable provision of Community law or on the basis of a ratified international agreement,
- audit is necessary in order to prevent the commission of crimes or offences, prevent the commission of the fiscal crime or fiscal offence or the securing of evidence,
- audit shall be carried out on the basis of the provisions of the Act on the system of monitoring and controlling the quality of fuels,
- audit is carried out in the course of the proceedings on the basis of the law on competition and consumer protection,
- audit is necessary to prevent infringement of the prohibition referred to in the Act on Counteracting Drug Addiction,
- conducting an audit is justified by a direct threat to life, health or the environment,
- the entrepreneur does not have home address or the deliveries of documents have been ineffective or hampered.
It is important that the audit is initiated no earlier than after expiry of 7 days (unless the entrepreneur lodges an application for earlier initiation of an audit) and not later than 30 days from the date of delivery of notification on intention of initiation of audit. In the case of the expiry of 30 days from the delivery of the notification and the audit has not been initiated, the another notification of entrepreneur is required. More than one audit of an entrepreneur cannot be carried out at the same time. Excluded from this rule are the following situations:
- ratified international agreements provide otherwise,
- audit is necessary in order to prevent the commission of crimes or offences, the commission of the fiscal crime or fiscal offence or the securing of evidence,
- audit is carried out in the course of the proceedings on the basis of the law on competition and consumer protection.
- audit is justified by a direct threat to life, health or environment,
- audit concerns the merits of the refund of tax on goods and services before the return of refund,
- audit is implementation of the obligations arising from the provisions of Community law on the protection of competition or of provisions of Community law on the protection of the financial interests of the European Community,
- the audit concerns the merits of the refund of tax on goods and services under the provisions on refunds to natural persons of some expenditures associated with housing construction,
- the audit concerns the merits of the refund of tax on goods and services pursuant to the rules on refunds to natural persons of some expenditures incurred in connection with their first housing construction.
Place of audit
The place for conducting audit is the registered office of the controlled party or a place where entrepreneur pursues an economic activity. If the entrepreneur agrees, checks may also be carried out at the audit authority's head office, if this will facilitate the process. In principle, controls should not interfere with entrepreneur's work and are conducted as smoothly as possible, during working hours, or during the actual pursuit of an economic activity.
The act also regulates the duration of all control of a body at the entrepreneur in one calendar year. Depending on the size of the employment and turnover of the entrepreneur, this period may not exceed:
- with regard to the micro-enterprises - 12 working days,
- for small businesses - 18 working days
- for medium-sized enterprises - 24 working days
- with regard to all other companies - 48 working days.
Activities of audit authority
Controls are carried out by the employees of audit authorities upon presentation to an entrepreneur or the person authorised by him/her of a professional identity card authorising to pursue such activities and after delivery of an authorisation to carry out checks, unless special provisions provide for the possibilty of control on presentation of a professional identity card. In this case, the authorisation shall be delivered to entrepreneur or a person authorised by him/her within the time-limits specified by those provisions, but not later than within 3 working days from the date of initiation of audit.
The checks carried out upon presentation of a professional identity card may only be made if they are necessary to prevent the commission of crime or offence, to prevent the commission of fiscal crime or fiscal offence or securing of evidence and, where an investigation is justified by a direct threat to life, health or environment. Scope of inspection does not go beyond the extent indicated in the authorisation.
The authorisation referred to above to constitute the basis for conducting audit must contain at least:
- indication of the legal basis,
- indication of audit authority,
- date and place of issue
- name and surname of the employee of audit authority authorised to perform checks and the number of the professional identity card,
- identification of entrepreneur
- determining the scope of the checks,
- indication of the date of starting and the expected date of completion of the audit,
- signature of person providing the authorisation specifying the occupied position or function,
- the letter of rights and obligations of the controlled entrepreneur.
Each entrepreneur is obliged to keep and store in the registered office an audit book, authorisations and control reports. The primary purpose of the book is the register of the number and duration of controls of the entrepreneur's activities. This takes the form of a series of documents or electronic form, with the presumption that electronic recording corresponds to the whole set of records kept by the entrepreneur. Despite the fact that the entrepreneur bears the obligation to keep the books, it shall contain entries made by the audit authority, which include:
- indication of the control authority,
- indication of the authorisation to control,
- the subject and scope of the audit carried out,
- the date of commencement and termination of audit,
- the post-inspection recommendations and follow-up measures,
- justification of the absence of a notification of the initiation of the audit
- reason for initiating the audit,
- justification of exceptions,
- reason for extending the duration of audit,
- justification of the duration of the interruption.
Moreover, the legislator imposes on the entrepreneur a duty to make an entry in the audit book informing on the implementation of audit recommendations or their repeal by the audit authority or within the framework of two-instances supreme authority or administrative court. The inspected entrepreneur is also required immediately, that is to say, on the same day or at the latest the following day, to show a copy of an audit book, its extracts or print-outs from the computerised system certified by the relevant entries in the document. Conversely, if the entrepreneur has made available to another body the documentation, then he/she has 3 working days to submit the above from the date of return of book by the authority.
An entrepreneur within three working days from the date of the initiation of the audit, is entitled to object to operations performed by the controlling authority in breach of Article 79 (79b), Article 80(1) and (2), Article 82(1) and Article 83(1) and 2, subject to Article 84d of the Act. In addition to indicating the forms of infringement, the objection must state reasons in the descriptions of facts. Lodging an objection suspends the time counted as a period of control and control authority, to which an objection has been filed shall have 3 working days to issue an order to withdraw or to continue their control activities. In the event of failure to meet this deadline, it is clear that the objection was taken into account and the effect is waiving of the checks. If the entrepreneur does not agree with the content of the decision, he/she within 3 days may lodge a complaint, which authority is obliged to examine within 7 days from the lodging. Another non-compliance with the time-limit for a complaint is tantamount to taking into account the allegations raised by the entrepreneur. Both to the proceedings, subject of which is a lodged objection and to complaint proceedings the Code of Administrative Procedure shall apply.
Changes to the principles of carrying out audit since 2017.
Since January 2017, there have been new provisions which reduce the burden of controls for entrepreneurs. The changes include:
- The principle of a single control in one case - the office will not be able to control entrepreneur's business several times in the same case. There are exceptions to this rule where there is a suspicion of a criminal offence.
- Control authorities will be required to include detailed information on procedures of control on their websites.
- If the checks will be lengthy, the entrepreneur may lodge a complaint to the court at the decision of audit authority about extending the duration of the checks.
- With the consent of entrepreneur joint inspections of different authorities will be possible — provided that they relate to the same case.
- Controls shall not be performed arbitrarily, but according to the previously carried out analysis. They shall determine activities which are the most exposed to the risk of offences