Category: Audit

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.

The Money Value of Time


The National Audit Office building, built orig...
The National Audit Office building, built originally as the Imperial Airways Empire Terminal. The statue, “Speed Wings over the World” is by Eric Broadbent” (Photo credit: Wikipedia)

According to page 2 of today’s UK Financial Times, a UK National Audit Office report shows over 6.5m people waited more than 10 minutes to get their calls answered by HMRC, adding £33m to customer’s phone bills and wasting £103m of their time last year.

This snippet of information triggered a few things that I wanted to say to you this morning. The first of these is, that, despite the fact that it is obviously pretty dire that people need to wait so long to get their calls answered by the service they are paying taxes to fund in the first place, at least in the UK there is a body which is concerened at the loss of time and places a value, in monetary terms, on that loss of time by the customer.

Anyone who has spent any time either in government offices, or even banks or supermarkets in this part of the world will probably confirm that the idea that the customer’s time is valuable and should be respected is a rather alien concept. Not so long ago it was an utterly alien concept, but even today it is still a concept which they find rather hard to grasp.

Not as bad as China, though, from what I heard and also saw. People being expected to queue all day outside the Chinese consulate for their visa and then at the very moment that the scheduled closing time of the office came the shutters come down like with Kiosk Keith and that was that. The spare time of the employees was utterly sacrosanct, that of the customer not at all. This of course shows an elitist mentality, which can be found in almost all state sector offices to one or another degree anywhere in the world. Expect it and try somehow to deal with it.

Much less acceptable is the wasting of the customer’s time in business. If the customer is paying then they have a right to have their matters expedited and people who keep people waiting ought either to invest in more infrastructure to avoid it or to wonder if they are in the right business. Continue reading “The Money Value of Time” →

Should your Company have a pro-forma audit?


For businesses which have never been audited but which are growing up quickly to meet the audit thresholds in a year or two, you may wish to consider having your first audit done while it is still voluntary to do so, and the results, if less positive than expected, can at least be kept private.

Once your business has exceeded the audit thresholds (very typically in Europe this means for a private company about 50 employees, 5 million Euros turnover and 2.5 million Euros of gross assets, and it means 2 out of those three conditions – we just stated actually the Polish ones verbatim, (with the proviso that they also state a set PLN amount to avoid subjectivity for businesses that are on the cusp), but most countries are not far off that – even the Czech Republic which really needs much smaller thresholds)

Clearly this doesn’t apply at all to public limited companies, ie. the “S.A.”, “a.s.”, UK plc or German AG style companies which must be audited regardless of size – in some jurisdictions even if they are dormant – but for private limited liability companies most jurisdictions have size criteria like the ones just given – for Slovakia about 60% of the sizes given, so please note that this is divergent from the Czech ones, which are far too high for that country and result in proportionally fewer audits, which is a bad thing for corporate governance in that country.

While you are under the limits audit is voluntary. And you can have an unofficial audit whereby the audit comes and does for you all the normal work he would do if officially appointed, but it is only pro-forma. “Pro-forma” is Latin for something like the idea of “as if” so the auditor will work and report as if they had been properly appointed, but it is really a dry run for you. You do not appoint them as statutory auditors in the minuted general meeting, you do not have to file the report as the audit was voluntary, and you get all the benefit of the audit without the risk, and on top of all of that, I can get you these pro-forma audits for only 75% of the cost of a statutory audit, because the Firms we associate with want to promote good voluntary governance practice in the economy.

If you wait for your first audit until it is an obligatory one because you’ve outgrown the size criteria – and as we come out of the recession that will happen to some of you next year hopefully sooner than you dare hope for now – then if the auditor finds something wrong then the report of the auditor could be “modified” – I’ll do a separate article on what sorts of “modifications” exist and what they mean in accountancy speak, but it’s not good if you get one.

It will not help if you need a loan, and it will probably trigger a lot of interest on the part of the tax inspector. But you’ll have to publish it anyway, if there isn’t time to do the remedial work a good auditor should outline to you in time for your statutory deadline.

Now auditors get cajoled, encouraged in a friendly way or even outright threatened by desparate managers and owners to overlook things or change to an opinion that doesn’t match the facts, and there is nothing that can be done in those circumstances. Auditors are not generally anywhere near as afraid of their client as they are of their regulator, but more than that we are educated throughout our professional lives to be independent in our outlook, and so the only way to get out of some modified opinions is to do the remedial work the auditor recommends or make the adjustments that they recommend.

There’s no point in changing to another auditor you think will be more pliable – they must write to the old auditor and ask if there are any reasons why they cannot act. The best thing to do, if you are not sure how well your company will stand up to an audit is to have your first one a year or so before you need to. Then if the audit shows up a lot to be desired, you have a whole year to put it right and nobody will ever know because auditors are bound by confidentiality – it isn’t us who even publish our reports, it’s the responsibility of the client. The report is given to its addressee, which is always the shareholder, and some other corporate governance boards if they are in existence.

So it’s well worth thinking about, especially if your business has been growing fast and maybe has outgrown its systems.

Let us know if we can help.

Related Articles