Category: Accounting and Audit Issues

Governance Is Not About Making a Big Song and Dance for the Sake of It


Why effective governance, auditing, and oversight depend on clarity, restraint, and role discipline

Good governance is often misunderstood. Many organisations behave as if oversight must be loud, dramatic, or ceremonially complex to be effective. But governance is not theatre. It is not a performance. It is a discipline rooted in clarity, proportionality, and the quiet confidence that comes from doing the right things consistently.

This article explores why governance fails when it becomes performative, drawing on classic cautionary tales, real‑world audit practice, and the recurring problem of Supervisory Boards drifting into executive territory. It concludes with a reminder from the “wise old owl” that the best oversight is often the quietest.

Governance and the Danger of Performative Oversight

Matilda and the problem of false alarms in governance

Hilaire Belloc’s Matilda is a perfect metaphor for governance gone wrong. Matilda repeatedly raised false alarms for the pleasure of the attention they brought. When the real fire came, nobody listened. She had exhausted the system’s capacity to take her seriously.

Many organisations fall into the same trap. They escalate everything. They dramatise routine matters. They mistake procedural fuss for foresight. And when a genuine governance risk finally emerges, the organisation is deafened by its own theatrics.

Key governance lesson: Oversight loses its power when everything is treated as urgent.

Edward Lear and the softer side of governance nonsense

Edward Lear’s nonsense characters offer a gentler warning. Their misadventures arise not from malice but from distraction, whimsy, or a love of spectacle. They are charming — but they are not models of governance.

Governance takeaway: Nonsense has its place, but not in the boardroom.

Audit Governance: When Emphasis of Matter Becomes a Song and Dance

The proper role of the Emphasis of Matter paragraph

The Emphasis of Matter (EoM) paragraph is a legitimate tool in the auditor’s report. It is used when:

  • the auditor’s opinion is unmodified,
  • management has already made full disclosure, and
  • the auditor judges the matter so fundamental that it merits highlighting.

Used correctly, it enhances clarity.

The problem: overuse of Emphasis of Matter paragraphs

Some auditors use EoMs as if they were Matilda shouting “Fire!” — emphasising matters already perfectly disclosed, simply to appear diligent. This is governance by performance, not governance by principle.

Worse still, some auditors are tempted to disclose information in the EoM that management has not disclosed. This is a cardinal error. If the auditor feels compelled to introduce new information, the correct response is a modified opinion, not a theatrical EoM.

When Emphasis of Matter is appropriate

There are legitimate cases — for example, in publicly listed companies where a disclosure is technically complete but placed where a reasonable reader might not expect it. In such cases, an EoM enhances transparency.

But it should be the exception, not the rule.

Supervisory Boards and the Governance Failure of Role Confusion

When overseers drift into executive management

A second common governance failure occurs when Supervisory Board members begin to act like executives. They:

  • rewrite management’s plans,
  • involve themselves in operational decisions,
  • direct staff,
  • or behave as if they are auditioning for an executive role.

This is not oversight. It is role confusion. It comes from human nature and is related to the mission creep we see in national governments and state sectors using regulators and regulations to reduce the remit of privatye businesses. Oversight boards in the private sector need to know that the temptation is there in human nature, but they need to know better. Let the execs do their job, give them duue encouragement, help them think, be a sparring partner when required, and know when to butt out when not.

The revolving‑door problem

In some organisations, careers shuttle between executive and non‑executive roles. This creates:

  • blurred accountability,
  • conflicts of interest,
  • weakened independence,
  • and a governance structure that looks busy but functions poorly.

An overseer who expects to become an operator tomorrow cannot hold today’s operators to account.

A historical contrast: overseers in the early church

The early church used the term episkopos — overseer — for individuals who were spiritually mature but still ordinary members of the community. Their authority came from example, not executive power.

Modern corporate governance is different, but the contrast is instructive:

  • Church oversight is pastoral.
  • State oversight is constitutional.
  • Business oversight is fiduciary.

These are three strands of a threefold cord not quickly broken — but only when each strand keeps its integrity.

Governance takeaway

Oversight is not a rehearsal for executive office. It is not shadow‑management. It is a separate vocation requiring distance, independence, and clarity.

Coda: The Wise Old Owl and the Power of Quiet Oversight

The old nursery verse about the wise old owl, usually attributed to Edward Hersey Richards, captures the heart of effective governance:

The more he saw, the less he spoke; The less he spoke, the more he heard.

It is a child’s rhyme, but it contains a governance truth many adults never learn.

Oversight — whether by non‑executive directors, auditors, regulators, or Supervisory Boards — is most effective when it is:

  • observant rather than intrusive,
  • attentive rather than theatrical,
  • measured rather than noisy.

If overseers make a fuss over everything, they become like Matilda: ignored when it matters. If they try to do management’s job, they lose the independence that gives oversight its value. If they speak too often or too loudly, they find that when they finally need to be heard, their voice no longer carries.

Good governance listens more than it lectures. It intervenes only when intervention is truly needed. And when it speaks — really speaks — people listen.

And what we can say about corporate governance is no less true when we speak about the government of nations.

ESG Reporting Postponed: Who Compensates the Audit Profession for Its Lost Investment?



Across the European Union, audit firms — large and small — have spent the last two years preparing for the arrival of mandatory ESG assurance under the Corporate Sustainability Reporting Directive (CSRD). The message from Brussels was unambiguous: “This is coming. Prepare yourselves.”

And the profession did exactly that.

Firms invested heavily in training, methodology, tooling, and staff development. Thousands of auditors sat through long courses, passed exams, and restructured internal processes to meet the new assurance requirements. Professional bodies across Europe built entire training ecosystems to ensure readiness.

Now, with the EU’s simplification package and the subsequent national transpositions — including Poland’s recent amendment — a large portion of the market has simply vanished for the next two years.

The result is a quiet but very real economic loss borne by the audit profession.

The EU Changed the Rules After the Profession Had Already Invested

The EU’s “Omnibus” simplification package raised the thresholds dramatically:

  • Only companies with more than 1,000 employees and
  • More than €450 million in turnover

will remain in the early waves of mandatory ESG reporting.

Member States were also given the option to postpone ESG reporting for companies that fall below these new thresholds — and several, including Poland, are now exercising that option.

This is not a national deviation. It is an EU‑permitted deferral.

But the effect is the same: the market that auditors trained for has been pushed back by at least two years.

The Cost to the Audit Profession: A Conservative EU‑Wide Estimate

Let us be modest — very modest — in estimating the cost borne by the profession.

Across the EU:

  • Tens of thousands of auditors undertook ESG assurance training.
  • Professional bodies developed new curricula.
  • Firms purchased software, tools, and methodology updates.
  • Staff hours were diverted from billable work to mandatory training.

A conservative estimate:

  • €1,000–€2,000 per auditor in direct training costs
  • €3,000–€5,000 per auditor in lost time, internal methodology work, and tooling
  • Tens of thousands of auditors trained

Even at the lowest end of the range, the EU‑wide cost easily exceeds:

€200–300 million

And that is a conservative figure.

The ROI Has Been Deferred — and in Many Cases, Destroyed

Training is perishable. Skills fade when not used. Standards evolve. Methodologies change.

If auditors cannot apply their ESG assurance training for two years, then:

  • much of the knowledge will need to be refreshed,
  • new standards will need to be learned,
  • and the original investment will have to be repeated.

This is not a theoretical risk. It is a certainty.

The EU asked the profession to prepare. The profession prepared. And now the promised market has been postponed.

Where Is the Compensation for This Lost Investment?

If a government requires an industry to invest in readiness — and then delays the implementation — the fair question is:

Who compensates the industry for the cost of compliance preparation?

At minimum, the EU should:

  • refund at least 50% of the training costs to national professional bodies,
  • earmark these funds for future refresher training,
  • and ensure that auditors who paid for early training are not forced to pay again when the rules finally take effect.

This is not a radical demand. It is a matter of fairness.

The audit profession did exactly what the EU asked it to do. The return on that investment has now been deferred — in some cases, nullified.

If the EU wants a well‑prepared assurance market in 2027–2028, it must recognise the cost of the false start it created.

Odroczenie raportowania ESG: kto zwróci audytorom koszty poniesione na przygotowanie?





W całej Unii Europejskiej firmy audytorskie — zarówno duże, jak i małe — przez ostatnie dwa lata intensywnie przygotowywały się do obowiązkowego badania raportów ESG wynikającego z dyrektywy CSRD. Przekaz z Brukseli był jednoznaczny: „To nadchodzi. Przygotujcie się.”

I zawód audytora zrobił dokładnie to, o co go poproszono.

Firmy zainwestowały ogromne środki w szkolenia, certyfikacje, aktualizację metodologii, narzędzia, oprogramowanie i rozwój pracowników. Tysiące audytorów odbyło wielogodzinne kursy, zdało egzaminy i przeorganizowało procesy wewnętrzne, aby sprostać nowym wymogom zapewnienia.

A teraz — po pakiecie uproszczeń UE i jego implementacjach krajowych, w tym ostatniej nowelizacji w Polsce — znaczna część rynku po prostu znika na najbliższe dwa lata.

To oznacza realną, choć cicho przemilczaną stratę ekonomiczną poniesioną przez cały zawód audytorski.

UE zmieniła zasady po tym, jak zawód już poniósł koszty

Pakiet uproszczeń („Omnibus”) znacząco podniósł progi wejścia do obowiązkowego raportowania:

  • powyżej 1 000 pracowników oraz
  • powyżej 450 mln EUR przychodów

— tylko takie firmy pozostają w pierwszych falach obowiązkowego raportowania ESG.

Państwa członkowskie otrzymały również możliwość odroczenia obowiązku raportowania dla firm, które po zmianie progów wypadają poza zakres dyrektywy.

Polska — podobnie jak inne kraje — korzysta z tej opcji.

To nie jest polska „specyfika”. To jest odroczenie dopuszczone przez UE.

Ale efekt jest identyczny: rynek, do którego przygotowywali się audytorzy, został odsunięty co najmniej o dwa lata.

Koszt dla zawodu audytora: ostrożny szacunek dla całej UE

Policzmy bardzo ostrożnie.

W całej Unii:

  • dziesiątki tysięcy audytorów przeszło szkolenia ESG,
  • organizacje zawodowe stworzyły nowe programy edukacyjne,
  • firmy zakupiły narzędzia, oprogramowanie i aktualizacje metodologii,
  • setki tysięcy godzin pracy zostało odciągniętych od zleceń na rzecz szkoleń.

Konserwatywny szacunek:

  • 1 000–2 000 EUR kosztów szkolenia na audytora,
  • 3 000–5 000 EUR kosztów utraconego czasu pracy, wdrożeń i narzędzi,
  • dziesiątki tysięcy przeszkolonych audytorów.

Nawet przy najniższych założeniach łączny koszt dla UE przekracza:

200–300 milionów EUR

I to jest szacunek ostrożny.

Zwrot z inwestycji został odroczony — a w wielu przypadkach zniszczony

Szkolenie to nie jest aktywo trwałe. Wiedza zanika, jeśli nie jest stosowana. Standardy się zmieniają. Metodologie ewoluują.

Jeżeli audytorzy nie będą mogli stosować zdobytej wiedzy przez dwa lata:

  • duża część kompetencji wyparuje,
  • konieczne będą szkolenia odświeżające,
  • a pierwotna inwestycja będzie musiała zostać powtórzona.

To nie jest ryzyko. To jest pewność.

UE poprosiła zawód o przygotowanie. Zawód się przygotował. A teraz obiecany rynek został przesunięty.

Kto zwróci koszty tej straconej inwestycji?

Jeżeli regulator wymaga od branży poniesienia kosztów przygotowania — a następnie opóźnia wdrożenie — to uczciwe pytanie brzmi:

Kto rekompensuje branży koszty przygotowania do regulacji?

Minimalnie UE powinna:

  • zwrócić co najmniej 50% kosztów szkoleniowych organizacjom zawodowym,
  • przeznaczyć te środki na bezpłatne szkolenia odświeżające,
  • zagwarantować, że audytorzy, którzy zapłacili za szkolenia „pierwszej fali”, nie będą musieli płacić ponownie.

To nie jest żądanie radykalne. To jest kwestia elementarnej sprawiedliwości.

Zawód audytora zrobił dokładnie to, czego od niego oczekiwano. Zwrot z tej inwestycji został odroczony — a w wielu przypadkach zniweczony.

Apel o odpowiedzialność i praktyczne wsparcie

Nie chodzi o obwinianie kogokolwiek. Chodzi o odpowiedzialność.

UE zmieniła zasady. Zawód poniósł koszty. Zawód poniesie je ponownie, gdy konieczne będą szkolenia odświeżające.

Częściowy zwrot — przekazany przez organizacje zawodowe — to absolutne minimum.

Jeżeli Unia Europejska chce mieć silny, kompetentny rynek zapewnienia ESG, musi wesprzeć tych, którzy mają ten rynek obsługiwać.

New Requirement for Quoted Companies in Poland


A new provision in the Act on Public Offers (Ustawy o Ofercie Publicznej) has introduced a new obligation on Polish PIEs to prepare an annual report on the remuneration of the management board and supervisory board and to submit this report to the auditor’s assessment.

Art. 90g of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies” introduces the new Remuneration Report. The supervisory board of a public company must prepare a report on the remuneration of the management board and the supervisory board each year. The scope of the report is specified in the provision cited above. The report has to be “assessed” by a statutory auditor to ensure that the information it contains is accurate and complete.

The first such annual Remuneration Report will be prepared jointly for the years 2019-2020 and the audits of them will be carried out for the first time in 2021.

The Remuneration Report will be prepared separately from the financial statements and the company’s annual report, and its “assessment” will be classified technically as “an assurance service, other than an audit of the financial statements”, and considered by the Regulator as part of the auditing business of a licensed firm. Only registered auditors and their companies licensed to audit Public Interest Entities should be engaged to perform these assurance services.  The purpose of the auditor’s assessment is to confirm that the remuneration report contains all the elements required by law. Responsibility for the substantive correctness of the information indicated in the remuneration report rests solely with the members of the company’s supervisory board, and the auditor should be independent to the entity. It may indeed be the same auditor which carries out the audit of the Financial Statements, according to Art. 136 paragraph. 1 of the Act on Statutory Auditors, therefore in most cases it will be the same auditor which you already have.

The above has been confirmed by the Financial Market Development Department at the Ministry of Finance in response to a query by the Chamber of Auditors in Poland (PIBR).

Should you be in a situation where your financial statements auditor is reluctant to carry out this review, they are not obliged to as it is separate to the existing contracts in place currently. You may prefer, for the sake of good corporate governance, to engage a smaller Firm which is able to carry out PIE audits for this task. Please contact us and we will assist you to a good offer from a reputable Firm for the audit, or alternatively if you would like help with the report itself, this ca also be done with Quoracy Consulting and our partners.

For further help, please use the contact form below.  It emails direct to me at the audit firm Grupa Strategia, which has been developing a competence in this area in anticipation of the changes.

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Upcoming changes to what Supervisory Boards in Poland can and cannot do.


The Ministry of State Assets has prepared a draft amendment to the Code of Commercial Companies. The project is currently at the stage of public consultations, which will last until September 19, 2020. The changes include introducing regulations to the holding law, but also strengthening the role of the Supervisory Board.

The most important changes are:

  • The Supervisory Board has the right to request from members of the management board, liquidators, proxies, employees of the company (including those employed under civil law contracts) to prepare or submit any information, documents, reports or explanations needed for supervision over the company. The completion date is set at max. 2 weeks with the possibility of its extension by the Supervisory Board.

  • introduces the obligation to inform the key statutory auditor about the meetings of the Supervisory Board, the subject of which are issues discussed before the AGM and the obligation for the statutory auditor to participate in such meetings.

  • The Supervisory Board will be able to appoint an advisor to the Supervisory Board to investigate, at the company’s expense, a specific issue related to the company’s operations or its financial standing.

  • the principle of open voting of the Supervisory Board is introduced, with the possibility of a different regulation in the statute or the SB regulations.

  • meetings of the Supervisory Board will have to be convened at least once a quarter (currently three times a year).

  • the draft explicitly provides for the possibility of appointing Supervisory Board committees. Until now, the provisions did not regulate this issue, with the exception of obligatory committees (eg the Audit Committee).

  • the role of the chairman in organizing the work of the Supervisory Board was underlined. The statutory requirements for convening Supervisory Board meetings were made more precise.
    Invitations will need to contain the information we already provide (date, time and place of the meeting and the proposed agenda
    the meeting) and the way of using means of distance communication when holding the meeting. The minimum notice period will be specified in the statutes.

  • it is proposed to clarify the issue of liability of Supervisory Board members. The draft stipulates that a member of the Supervisory Board should, in the performance of his duties, exercise due diligence resulting from the professional nature of his activity and be loyal to the company. The obligation to keep the company’s secrets will also apply after the mandate has expired.
    At the same time, it is proposed to add a provision according to which: “A member of the management board, supervisory board, audit committee and liquidator does not violate the obligation to exercise due diligence if acting loyally to the company, he acts within the limits of justified economic risk, including on the basis of information, analyzes and opinions which, in the circumstances, should be taken into account when making a careful assessment. “

Information courtesy of chudzik.pl, in my opinion an excellent law firm, based in Lodz, for corporate legal and CoSec issues in Poland at the highest level.

From myself, I would just add that this is what is already in place in most advanced economies, and that there is nothing unhelpful, for once, in this draft legislation.

Introducing Tina Ampure – have you got all of her records?


This Latin songstress could be described as something like Shakira meets Rita Ora meets Julio Iglesias. Could be described, that is, if she existed as an actual pop star rather than an accounting mnemonic.

In any case, if you are producing financial statements, you do need to have all of her records. That is, you need to record and disclose the various aspects referred to in each syllable of her name.

TI – Timing
NA – Nature
AM – Amount
PU – Purpose
RE – Reason

These five considerations come up again and again when it comes to putting the narrative blurb into the notes and disclosures of items in the Financial Statements prepared under IFRS, especially any where judgments have been used or estimation uncertainty exists. Her name is a mini checklist for each note which describes circumstance. Often you need to state the range of possible uncertainty, or what would happen if something else happens, but still this tends to be around these basic five aspects.

Location, location and location may be all that is important in real estate development, but this is not a separate consideration here.  The When, What, How much, Why and How come are the more apposite of Mr Kipling’s exceedingly good serving men who taught him all he knew in that Elephant’s Child poem rather than Who and Where. Those two kind of get the day off. How on the other hand has to work bouchées doubles, appearing both as the quantum “How Much” and the reason “How Come”.

People may wonder why it is that IFRS standards talk about both Reason and Purpose. Are these two not synonyms of each other? Almost, I would say, but not quite. When I have a purpose, it is a forward looking intention, focused on what I hope to get out of an action, or transaction. When I have a reason, it refers to something that happened that caused the necessity that is being addressed. So for sure both purpose and reason talk about the motivation for a treatment or a transaction in the Entity, but one is a forward-looking aspect of the motivation and the other is backward-looking.

And of course, when we look forward and discuss the purpose of a thing, it behooves us, as managers and auditors also, to consider whether this motivation, this thing which the Entity has promised itself (usually referred to as a Future Economic Benefit (or FEB, as we don’t expect anything to come of it until at least next February) – is it still actual? Is it still just as likely to happen or has something happened since this was mooted that has occasioned the matter to “go south” as the Americans say, or “go pear shaped” as the British say? If so, we are likely to need to revise the value of the item and, at the very least, describe all those circumstances.

So Tina Ampure is just a very small mini-checklist of all these aspects, which it may help you to bear in mind while drafting notes and disclosures or running a check on them. Not only is this abugida-style acronym helpful in IFRS reporting, but also you may get mileage out of Tina in non-financial corporate reporting also.

So, make sure you get all her records…

While I am about it, I will mention some other important points about notes to the financial statements.

  • They do form part of the financial statements, and therefore you will commonly see at the bottom of primary statements the utterance that “the notes to the accounts for part of these financial statements”
  • An overriding point other than the Timing, Nature etc, is that they contain enough information to enable understanding of accounts by the people using them to make decisions, and understand them in a way which will help them make appropriate decisions in the area that appertains to them. Likewise, cluttering disclosures with unnecessary information is counter-productive and is therefore frowned upon.  I have yet to see someone go to prison for making too many disclosures, but you are unlikely to win in the annual gala of best financial statements in your country, put it that way.
  • IFRS mandates proper cross referencing of these notes to the financial statements, and also recommends the order be first a statements that IFRS are used (with any exceptions), then a note of significant accounting policies, next the run through of explanations to the line items in the primary statements FOLLOWING THE ORDER of presentation in those statements. Finally all the other disclosures which don’t relate to single line items, eg post balance-sheet events, etc.

 

If in doubt, try to read the set of notes “in the shoes of” the various class of user of financial statements which the Entity has. Not forgetting, of course, the Competition and the Tax Office.

 

 

What’s the big deal about double-entry bookkeeping?


Accountancy is the language of business. Not always the language of macro-economics which is why that can go haywire, but of business it is. It is the way in which we keep things making sense and not having assets and liabilities which correspond to nothing but someone’s desire that they should be there, with no basis in fact.

If accountancy is our common language and logic in business, then the principles of double entry are like the grammar of that language. Sure, small businesses can get by on a simple cashbook or other prime-entry book but this doesn’t enable these business to draw up proper balance sheets or profit and loss accounts based on accounting language. You can’t make accruals and prepayments in a cash book.

So the simple single-entry language is like a language with no verbs, like baby language in business. And when the business grows to a certain size it cannot do its thinking properly without proper statements and these statements require double-entry bookkeeping to be drawn up.

Once a person has mastered double entry bookkeeping, it enables him or her to be able to assess the consequences of a transaction or an accounting treatment more easily, on the back on an envelope, in a spreadsheet or just in their head. Those business lawyers, tax advisers and others who miss the step of learning double entry usually show themselves up when they are in a room with such as are familiar with and fluent in this language.

The best that you can do is take a simple bookkeeping book and work through it, at first, but the penny is only likely to drop when you have done a few sets of books in real life. This is usually done close to the start of one’s career. Setting some time aside to spend a year or at least six months in a bookkeeping department is time well invested for the rest of one’s career, like learning to touch type or getting your driving licence under your belt early on.

The call to action here, if you want one, is not to skip it if you are early in your career or still studying, not to assume computers will take care of it and therefore you don’t need to understand it. If you are already advanced and feel bad that you missed it, then not only are there books but also courses in LinkedIn for premium members which can help put that right. Or there is night school in the town where you live, which may be the best of all if you live somewhere other than the UK or USA whose atypical systems dominate the approach books tend to take on the topic.