The main objective of an audit is to enable the auditor express an opinion on the financial statements being audited. ISA 700/701 requires that the auditors’ opinion should state whether the financial statements give a true and fair view and are fairly presented in all material respects in accordance with applicable financial reporting framework where an unmodified opinion is expressed.
Required:
Explain what is meant by true and fair view. (5 marks)
View Solution
There is no formal (legal or professional) definition of the term true and fair view. However, from general usage, the meaning of the term can be looked at from its components, namely:
- True: The accounts are free from material misstatements and therefore reflects the underlying records.
- Fair: Implies there is no undue bias in the financial statements or the way in which they have been presented.
Additionally, it connotes that judgement exercised in the preparation and auditing of the financial statements are properly exercised in line with appropriate financial reporting standards.
Judgment is used both by directors of the company in preparing financial statements and auditors in performing they work. However “True and Fair” or “ present fairly” assures that the judgment are fair and are in line with financial standards and that the Financial Statements can be relied upon.