statutory auditor, Senior Audit Manager at RSM Poland
We have already covered the issue of cooperation with an auditor (http://www.rsmpoland.pl/en/insights/blog/importance-auditing-services-po...) but, while scanning publicly available financial statements, especially of the companies listed on New Connect, I came to the conclusion that there is still too little talk about certain issues. I suggest looking at a few randomly selected financial statements presented on the issuers’ websites. My point is not to assess the economic activity of the companies, but to see how information on achievements of a company in a given year is included in its annual financial statements, which, to my mind, should constitute the information provided by the board to the supreme authority of the company, namely its owners (indeed, it is shareholders that are most important in the company, because the ownership belongs to them). I browse through financial statements of the companies listed on New Connect quite often and two things strike me, as an outside reader, most: first, not including all data required by the Accounting Act and second, overall slovenliness of the presented financial statements, which aspects show the attitude of the companies’ managements to this official document.
My financial statements speak about who I am
As an auditor, I sometimes hear people saying „… oh no, we are still left with additional notes to financial statements”, “what is all this information for?” and so on. I answer: „Since the legislator has specified the minimum scope of necessary information to be presented in the statements, such information is material and needed for the assessment of the financial situation of a company and its achievements in a given year”. Meeting the information requirements is especially important for minority shareholders, and particularly those who invest their funds on New Connect. Due to the fact that New Connect is not as regulated as the Warsaw Stock Exchange, investment risk is much higher, and therefore, complete and clear data is much more necessary. Another issue is the ordinary slovenliness of the financial statements. In my primary school, and I don’t think it was in the old times, my teachers dinned into me that “my notebook speaks about who I am”. Now I would say: “my financial statements speak about my attitude towards the reader”.
Financial statements like a book cover
Incomplete and sloppily prepared financial statements are a failure that, unfortunately, has many parents. Firstly, people preparing the statements; They often don’t have skills but more often the idea that annual financial statements are not for their own satisfaction and use, but serve a particular group of people (shareholders) and have a particular purpose (financial assessment of the overall achievements of a company in a given financial year). Secondly, management boards; They frequently approve of and publish such sloppy financial statements. Such attitude is quite surprising, especially given the fact that we usually „judge a book by its cover”, and surely, there is no better cover for a book called Company than its financial statements. Thirdly, shareholders; They do not press management boards too much so that the state of affairs could improve. Finally (and here we – auditors must unfortunately strike our breasts) – statutory auditors; While I am furthest away from implying that auditors lack sufficient knowledge, with shame, I must admit that in many cases we do not have enough idea of what will happen with financial statements after they are signed. It seems like we are making a full circle now, coming to the conclusion similar to the one drawn in the article I referred to at the very beginning of this post: deciding to cooperate with an auditor, choose the best possible expert (which usually does not mean the cheapest). A good auditor is a specialist who will not only support you with the knowledge of accounting and taxes, but also guide on how to publish such financial statements that we do not have to feel shame about.