Advertisement

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.

Advertisement - Article continues below

"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.

Advertisement
Advertisement

Recommended

Modern monetary theory (MMT)
Glossary

Modern monetary theory (MMT)

Modern monetary theory, or MMT, has become popular on the left, both in the UK and abroad. (Wags say that it stands for "magic money tree".) 
14 Jul 2020
Modern monetary theory (MMT)
Glossary

Modern monetary theory (MMT)

Modern Monetary theory, or MMT, has become popular on the left, both in the UK and abroad. (Wags say that it stands for "magic money tree".) 
14 Jul 2020
Barbell strategy
Glossary

Barbell strategy

A “barbell… investment strategy means weighting a portfolio towards the two extreme ends of an asset class with nothing in the middle.
8 Jul 2020
Real exchange rate
Glossary

Real exchange rate

The real exchange rate between two currencies combines the nominal exchange rate with the ratio of the price of goods or services in two different cou…
26 Jun 2020

Most Popular

An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Three ideas for Lloyds Bank's new boss
UK stockmarkets

Three ideas for Lloyds Bank's new boss

The Black Horse needs whipping into shape. A change at the top provides a great opportunity, says Matthew Lynn.
12 Jul 2020
Why the moving average is my favourite charting tool
Sponsored

Why the moving average is my favourite charting tool

Traders and technical analysts use "moving averages" to iron out daily fluctuations and give a much clearer picture of a market's direction. Dominic …
13 Jul 2020