True and fair value

There is quite a lot of misunderstanding about what auditors mean when they sign off accounts as “true and fair”. For instance, they are not 100% certifying every number in the balance sheet and profit and loss account.

“True” means the numbers given by the directors are reasonably accurate to within a level of tolerable error. If the accounts of, say, BP had to be certified as accurate to the nearest penny, the audit fee would be prohibitively high.

“Fair” refers to the fact that a lot of judgement goes into a set of accounts. For example, working out the useful lives of assets for the purposes of calculating a “depreciation” charge involves a lot of estimation.

So auditors merely express an opinion that the accounts are fairly accurate and free from too much management bias.

Merryn

Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.