What EU membership means for auditors

Andrew Kinast is the managing partner of Grant Thornton Poland.

Poland is now less than four weeks away from the European Union membership referendum. What will the implications of joining the union be for the accounting profession?

Clearly, we are a long way from incorporating EU legislation into domestic law. In theory the accounting profession should now be fully compliant with EU regulations, but it is some way from achieving this. In previous articles I have pointed out the failures to comply and the absurdities adopted against better judgment. Not the least of these is the failure to categorically implement International Accounting Standards as mandatory and to try to start the process of developing national accounting standards after many years of delay. As the EU moves towards international standards and unification across all countries, the development of national standards is a somewhat fatuous exercise. Unless, of course, you believe that the aim is to transfer public money into the pockets of no doubt wise and learned professors who are charged with reinventing the wheel.

The auditing profession here is pretty much monopolized by the international firms at the top end of the market, a myriad of local firms servicing smaller companies and those larger domestic companies that do not see the need to use a firm with international capability. The process of EU integration will see Polish companies of all sizes more and more exposed to international trade. Hence, either the local audit and tax advisory firms will form links with counterparts in other EU countries or they will fall out of the marketplace when they fail to meet their clients' international advisory needs.

In any case, the worldwide trend is for integration of the accounting profession, and it will be interesting to see whether any of the larger purely Polish audit firms will survive without forming links with the smaller global alliances. Which I suppose is all good news for the remaining four and the two serious Group A practices here. But it does raise the question of why the profession here did not take more proactive steps to deal with the future.

As far as professional regulators are concerned, the local profession will come under more and more pressure to comply fully with international best practice. This partly arises from membership in the International Federation of Accountants and from EU directives, but probably most significantly from the open market whereby professionals who have qualified in other jurisdictions will be free to practice in any member state. Certainly, the brighter individuals will seek membership in the professional body that gives them better training, better perspectives and better value for money. Which is not a criticism of the Polish Chamber of Auditors, but maybe a marker that as a body it will face increased competition for the auditors working in the country.

On the part of accountants working in industry, international competition will again increase. Those with language skills will become increasingly mobile, and if salary levels are not equalized, many will move to other European countries. We may, however, see inward flows of accountants from outside the EU, as has been the case in the United Kingdom and elsewhere. Large numbers of highly qualified accountants from India and China, for instance, make the accounting profession a truly international one in many countries.

Increasingly, we will note a "westernization" of accounting practices within companies. Too often to this day company accountants here serve no useful purpose other than to ensure tax and statutory reporting compliance. It is still relatively rare in smaller companies for accountants to provide reliable and timely management information. All too often accountants also claim spurious reasons for why their systems cannot produce the data management required. As companies face increased competition from across the EU, reliable management data will become key to business success. Whether there will be enough suitably trained accountants remains to be seen, but the absence of a universally recognized local qualification will be a barrier to recruitment and initial evaluation of competence.

So in a way, perhaps the words and actions of the League of Polish Families party as the latter-day Luddites may save the day. But that would really be the wrong result. It is much better to be a poor member of the club than to not be in the club at all.