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The Warsaw Voice » Other » October 14, 2009
Britain in Poland
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Restructuring Rather Than Crisis
October 14, 2009   
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Joe Smoczyński, a Partner in Baker Tilly Smoczyński i Partnerzy, talks to Beata Gołębiewska-Chęciak.

What is the state of the Polish and global economies in your opinion? Is the economic crisis about to end or are you expecting a second wave?
There are various perceptions of what is meant by a crisis. In Britain and other major world economies the credit crunch has led to negative growth, requiring governments to pump in cash and instigate life-saving schemes. This step has been successful to an extent as it stabilized the major economies. Now the time has come to draw up the balance sheet and work out how the resulting budget deficits will be substantially reduced over time. This will be a long painful haul as the consumer will be footing the bill with tax increases, reduction of benefits, and so on. Banks are encouraging savings and not lending. Therefore real consumer spending power will reduce.

Poland on the other hand has maintained positive economic growth with the government putting in safeguards to reduce the influence of other EU economies on ours. Adding the EU grants to this, with the government guaranteeing the required Polish contribution, growth should be sustainable for the long term.

To me this is not a crisis, it is a restructuring process with medium term solutions without the dramatic deficits. Polish businesses are known for flexibility, adjusting to the changing situation. As people in Poland say, "Polak potrafi!" (A Pole will find a way.)
How seriously has the crisis affected your firm? What have you done to deal with the effects of the economic slowdown?
An International Network Independent Audit Firm, such as ours, does not succumb easily to fluctuating market conditions because it provides a wide range of services. The change on the market has prompted a focus shift from traditional assignments to Financial Advisory. We help our clients restructure their companies, thanks to which we have even more work than last year, both here in Warsaw and at our branches in Cracow and Wrocław. We also provide services to several clients entering the NewConnect market. These clients are preparing for a future equity capital increase or merger / acquisition possibilities. Restructuring improves their potential for engineering market concentration.

The 8th EU directive was introduced into Poland in May 2009, as the law on auditors and their self-regulation. What do you think of this law?

The law was introduced because Polish legislation had to implement EU Directive no. 43 (earlier called the 8th) on auditors' independence. However, the Polish interpretation of the auditors' "independence" principle differs considerably from international understanding. Under the Polish law, when an auditor's annual revenues from services provided to one client are below 40 percent, he is "independent" whereas in Britain such revenues cannot exceed 10 percent from a public interest client. From British auditors' point of view, many of their Polish colleagues are "dependent" and not "independent". It is important to investors and company owners for auditors' opinions not to be influenced by the size of the fee. Only then can an opinion be credible as business decisions are often based on such statements.

I am concerned by the structure of the Polish Audit Oversight Committee, which publicly monitors the work of an auditor. Only two of the nine committee members are auditors in practice, with the majority being civil servants with no audit experience. I fear that the committee may adopt a bureaucratic approach, attaching greater weight to formal compliance procedures than assessing the quality of the opinions issued by auditors and the underlying work. Also the civil servant majority may be tempted to change the profession of watchdogs into bloodhounds. We would then lose the confidence of investors and owners as we would be policing and assessing businesses.
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