The Benefits of an Audit: Improving Corporate Financial Reporting in Poland
December 17, 2013
- High quality financial reporting audits are fundamental to enhance Poland’s business environment on the international arena and to facilitate access to capital markets or direct investments.
- In partnership with the World Bank Centre for Financial Reporting Reform (CFRR) and thanks to a $10 million grant from the Swiss Enlargement Contribution, Poland is strengthening its corporate financial reporting capacity to achieve EU harmonisation with international standards in the area of accounting and auditing.
- More than 3,500 auditors, accountants, government staff, regulators, and academics have been trained in international accounting and auditing standards thus enhancing their capacity competencies for applying, enforcing or teaching them.
The 2008 financial crisis that enveloped the main economies of the world brought a series of aftershocks to the system of financial regulation and oversight as well a significant number of criticisms to the financial reporting world in the use and relevance of the audit report. Post crisis, the G20 group of nations underscored the importance of both International Standards and the robustness of the audit report by insisting that harmonisation of the major economies in a financial reporting sense was essential to help mitigate against a crisis of similar proportions ever happening again.
While understandable, these criticisms nonetheless overshadow all of the positive aspects provided by an audit – especially in a country like Poland which is making significant progress with improving its capacity in international financial reporting because enhanced auditing mechanisms and its high quality that are standardized across the entire country can help foster transparency and trust - necessary conditions for attracting investment and bolstering the business environment in any country, including Poland.
In the nearly ten years since it joined the European Union (EU), Poland has made great strides in bringing its financial reporting policies in line with the EU’s vision of “smart regulation" – a platform that emphasizes the delivery of EU polices and laws capable of offering the greatest possible benefits to people and businesses in the most effective way. The most recent June 2013 new EU directive on accounting will have to be adapted to the Polish regulation within two years. Additionally, there is still room for advancement in implementing the provisions of the acquis in practice.
In particular, there is a need to improve the operation of the system of public oversight and to strengthen the capacity of the auditing profession to implement the provisions of the Statutory Audit Directive. The projects organized under Poland’s FRTAP program are designed to address these issues. Although the EU has not yet adopted universal auditing standards as part of its smart regulation agenda, policy makers in Poland have nonetheless worked to improve the country’s business environment - recognizing that by doing so they can better position the country to attract more foreign investment and provide the long-term capital necessary to create employment-generating activities. This, in turn, can help contribute to financial stability in Poland and facilitate long-term savings in the country.
I am relying on [the idea] that members of the KibR would treat responsibilities resulting from public oversight...as a tool that increases the quality of financial audit capabilities in Poland
In order to carry out this ambitious program, the World Bank has been working with a wide range of stakeholders in the country - including the Ministry of Finance, the Financial Supervision Commission, the Audit Oversight Commission, the Chamber of Auditors, the Polish Accountants’ Association, and various private sector organizations. In support of the ongoing work in Poland in the area of auditing, Under Secretary of State of the Ministry of Finance and Chair of the Audit Commission Dr. Podedworna-Tarnowska spoke at the Fourteenth Annual Auditing Conference of the National Chamber of Statutory Auditors (KibR) in October, 2013.
"I am relying on [the idea] that members of the KibR would treat responsibilities resulting from public oversight not as an unfortunate necessity created by legislation - both local and EU - which has to be adhered to, but as a tool that increases the quality of financial audit capabilities in Poland and builds confidence in certified auditors as special profession that deserves public trust"
With more than 500 Polish companies present on the capital market, the need for maintaining high quality financial reporting capabilities among these companies is essential. Over the last four years, Poland and the World Bank Centre for Financial Reporting Reform have been working together - leveraging more than $10 million from the Swiss Enlargement Contribution - to implement the Financial Reporting Technical Assistance Program (FRTAP) in order to address this need. This multifaceted program is designed to help public and private organizations develop reporting and auditing mechanisms that are more closely aligned with International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA) while avoiding undue burden on its small and medium sized enterprises (SMEs).
Training courses and technical advice programs are being implemented in parallel with international workshops, study trips, and capacity building initiatives, which are collectively helping Poland to implement a sustainable regulatory and institutional framework and improve the oversight and quality assurance of audits.
Already, more than 3,500 auditors, accountants, government staff, regulators, academics have benefited from this program and thousands more are expected to participate by the time the program is scheduled to end in 2015. All of these actions are further evidence of Poland’s continued commitment to increasing transparency in the country and providing a friendlier business environment for both Polish and international organizations. By doing so, Poland is proving – perhaps counter intuitively – that threat of an audit may actually be good for business.
The World Bank Centre for Financial Reporting Reform (CFRR) located in Vienna, Austria, is responsible for the World Bank’s corporate financial reporting activities across the Europe and Central Asia region. The Centre provides knowledge services and capacity development assistance. Services include analytical and advisory services, learning and skill development, know-how and knowledge transfer, and technical assistance and institutional strengthening.