Audit Partner at RSM Poland
It is cloudy outside, and it often rains. The signs of autumn are very visible to the naked eye. It is that time of year when you once again hear summaries of the past three quarters, along with reflections about the end of the current fiscal year and the following one from the business perspective. In a robust organisation, it is the time when you compare the actual results with your earlier assumptions, and try to draw some conclusions and translate them into your future plans.
Unfortunately, even though senior management is focused on business and devote a lot of time on it, their involvement in financial reporting is not all that visible. And yet financial reporting is an indispensable part of any business, its hallmark that brings together the entire organisation’s efforts and activities, being their quantification in the form of financial statements. You can read more about the essence of accounting policy and financial reporting on our blog.
In this and in the next post, I am going to help you all realise and appreciate how immense the impact of managerial decisions is on the quality of company’s reporting. I would like to point out that if the company’s management board (and supervisory bodies) are not aware of the essence of accounting, do not understand the necessity of preparing financial statements and do not recognise the goal behind internal and external audit, any financial data processed by financial and accounting services are subject to material error, or at least fail to represent all economic events fairly and clearly. If the management does not take appropriate follow-up measures after audits, one cannot expect the financial and accounting services to do so. Management Boards and Supervisory Boards are competent bodies to supervise putting in place any changes and enhancing the quality of information later provided to owners or any interested institutions.
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As a practitioner, I witness the same situation every year: companies in Poland do not care about their financial reporting, unless their management is forced to do so by the public or investors who are much interested. The lack of appropriate disclosures in financial statements or emerging errors are primarily the result of:
- “superiority” of the tax law over balance sheet law, resulting from the fact that penal sanctions set forth in the Accounting Act and the Commercial Companies Code are not applied,
- insufficient knowledge (and/or involvement) of management boards and members of supervisory bodies about financial reporting matters and
- audit procedures ill-chosen by statutory auditors which make it impossible to identify material deficiencies or analyse the completeness of relevant information disclosed in financial statements.
The period of closing the financial and fiscal year should involve intensive work not only in the accounting department, but also by senior management. Management Boards and Supervisory Boards should take follow-up measures after audits and see to it that financial data processed by financial and accounting services represent all economic events fairly and clearly. Most of all, they should make every effort to prevent any material errors in financial statements that would later have to be corrected by the auditor.
I will discuss the most common errors in financial statements in the upcoming post. In the meantime, I would like to wish all accountants no errors and omissions. This can be ensured by adequate expertise and the involvement of Management Boards and members of the supervisory bodies at the right stage of developing the financial reporting.
 I am referring to provisions of Article 77 and 79 of the Accounting Act (uniform text Journal of Laws 351 of 2019) and articles 585 and next of the Commercial Companies Code (Journal of Laws 94 of 2000, item 1037, as amended).
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