When firing a bow using penetrating shot with my poison bow. The first person was hit, and the 2nd person missed, but it still applied the Poison effect to the 2nd person.
I then had a situation where the first person was missed, but the 2nd person was hit, but this time, the poison effect was not cast on the 2nd person.
So, it appears the the effect is applied to the correct target, but based on the incorrect hit. i.e. the first person in the row must be hit for the effect to be applied, regardless of whether the correct one is hit or not.