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True and fair value

There is quite a lot of misunderstanding about what auditors mean when they sign off accounts as "true and fair".

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.

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"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.

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