diff --git a/plugins/catalog/src/components/EntityProcessingErrorsPanel/EntityProcessingErrorsPanel.test.tsx b/plugins/catalog/src/components/EntityProcessingErrorsPanel/EntityProcessingErrorsPanel.test.tsx
index a4e284a0eb..9990277da3 100644
--- a/plugins/catalog/src/components/EntityProcessingErrorsPanel/EntityProcessingErrorsPanel.test.tsx
+++ b/plugins/catalog/src/components/EntityProcessingErrorsPanel/EntityProcessingErrorsPanel.test.tsx
@@ -14,14 +14,24 @@
  * limitations under the License.
  */
 
-import { EntityProvider } from '@backstage/plugin-catalog-react';
+import {
+  CatalogApi,
+  catalogApiRef,
+  EntityProvider,
+} from '@backstage/plugin-catalog-react';
 
 import { renderInTestApp } from '@backstage/test-utils';
 import React from 'react';
 import { EntityProcessingErrorsPanel } from './EntityProcessingErrorsPanel';
-import { Entity } from '@backstage/catalog-model';
+import { Entity, getEntityName } from '@backstage/catalog-model';
+import { ApiProvider, ApiRegistry } from '@backstage/core-app-api';
 
 describe('<EntityProcessErrors />', () => {
+  const catalogClient: jest.Mocked<CatalogApi> = {
+    getEntityAncestors: jest.fn(),
+  } as any;
+  const apis = ApiRegistry.with(catalogApiRef, catalogClient);
+
   it('renders EntityProcessErrors if the entity has errors', async () => {
     const entity: Entity = {
       apiVersion: 'v1',
@@ -86,10 +96,16 @@ describe('<EntityProcessErrors />', () => {
       },
     };
 
+    catalogClient.getEntityAncestors.mockResolvedValue({
+      root: getEntityName(entity),
+      items: [{ entity, parents: [] }],
+    });
     const { getByText, queryByText } = await renderInTestApp(
-      <EntityProvider entity={entity}>
-        <EntityProcessingErrorsPanel />
-      </EntityProvider>,
+      <ApiProvider apis={apis}>
+        <EntityProvider entity={entity}>
+          <EntityProcessingErrorsPanel />
+        </EntityProvider>
+      </ApiProvider>,
     );
 
     expect(
@@ -99,5 +115,110 @@ describe('<EntityProcessErrors />', () => {
     ).toBeInTheDocument();
     expect(getByText('Error: Foo')).toBeInTheDocument();
     expect(queryByText('Error: This should not be rendered')).toBeNull();
+    expect(
+      queryByText('The error below originates from'),
+    ).not.toBeInTheDocument();
+  });
+
+  it('renders EntityProcessErrors if the parent entity has errors', async () => {
+    const entity: Entity = {
+      apiVersion: 'v1',
+      kind: 'Component',
+      metadata: {
+        name: 'software',
+        description: 'This is the description',
+      },
+      spec: {
+        owner: 'guest',
+        type: 'service',
+        lifecycle: 'production',
+      },
+    };
+
+    const parent: Entity = {
+      apiVersion: 'v1',
+      kind: 'Component',
+      metadata: {
+        name: 'parent',
+        description: 'This is the description',
+      },
+
+      spec: {
+        owner: 'guest',
+        type: 'service',
+        lifecycle: 'production',
+      },
+      status: {
+        items: [
+          {
+            type: 'backstage.io/catalog-processing',
+            level: 'error',
+            message:
+              'InputError: Policy check failed; caused by Error: Malformed envelope, /metadata/labels should be object',
+            error: {
+              name: 'InputError',
+              message:
+                'Policy check failed; caused by Error: Malformed envelope, /metadata/labels should be object',
+              cause: {
+                name: 'Error',
+                message:
+                  'Malformed envelope, /metadata/labels should be object',
+              },
+            },
+          },
+          {
+            type: 'foo',
+            level: 'error',
+            message: 'InputError: This should not be rendered',
+            error: {
+              name: 'InputError',
+              message: 'Foo',
+              cause: {
+                name: 'Error',
+                message:
+                  'Malformed envelope, /metadata/labels should be object',
+              },
+            },
+          },
+          {
+            type: 'backstage.io/catalog-processing',
+            level: 'error',
+            message: 'InputError: Foo',
+            error: {
+              name: 'InputError',
+              message: 'Foo',
+              cause: {
+                name: 'Error',
+                message:
+                  'Malformed envelope, /metadata/labels should be object',
+              },
+            },
+          },
+        ],
+      },
+    };
+    catalogClient.getEntityAncestors.mockResolvedValue({
+      root: getEntityName(entity),
+      items: [
+        { entity, parents: [getEntityName(parent)] },
+        { entity: parent, parents: [] },
+      ],
+    });
+    const { getByText, queryByText } = await renderInTestApp(
+      <ApiProvider apis={apis}>
+        <EntityProvider entity={entity}>
+          <EntityProcessingErrorsPanel />
+        </EntityProvider>
+      </ApiProvider>,
+    );
+
+    expect(
+      getByText(
+        'Error: Policy check failed; caused by Error: Malformed envelope, /metadata/labels should be object',
+      ),
+    ).toBeInTheDocument();
+    expect(getByText('Error: Foo')).toBeInTheDocument();
+    expect(queryByText('Error: This should not be rendered')).toBeNull();
+    expect(queryByText('The error below originates from')).toBeInTheDocument();
   });
 });