True and Fair view - Lecture 3

Question 1

Who is responsible for ensuring a true and fair view?

Answer 1

.Management and those responsible for corporate governance
.External auditors

Question 2

It is the responsibility of the directors to manage the company so that……

Answer 2

.It’s objectives are achieved
.Assess business risks and devise necessary strategies to deal with them

Question 3

Responsibilities of management under the Companies Act 2006 include….

Answer 3

.Ensure the company complies with applicable laws and regulations
.Money laundering, health and safety
.Prepare company financial statements
.Keep proper accounting records

Question 4

What are external auditor’s responsible for?

Answer 4

.For obtaining audit evidence
.Assess the internal control systems
.Required to report to those charged with governance
.Responsible for giving an opinion

Question 5

Where should a true and fair view be given?

Answer 5

In the audit report

Question 6

True and fair view is a legal requirement under which UK and EU laws?

Answer 6

.Companies Act 2006
.EU law - Company law directives

Question 7

Main assumptions of true and fair view include….

Answer 7

.Financial statements are free from undue bias
.Financial statements express ontological truth
.Auditors use professional judgement to not mislead users
.Auditor’s opinion contributes to the integrity of financial reporting

Question 8

The concept of True and fair view and what it means and symbolises is dependent on…..

Answer 8

.Socio-economic contexts
.Professional practices and routines

Question 9

Why is there little consensus on the definition of TVF?

Answer 9

There is an absence of proper definition

Question 10

Technical terms being translated into another language have the problem of…..

Answer 10

An increased risk of misunderstanding

Question 11

Inappropriate label in the translation of an accounting terminology creates problems for…..

Answer 11

.International accounting communication
.Both users as well as preparers of financial statements
.Researchers, students

Question 12

What factors are the proposal’s to replace TVF based on?

Answer 12

.The meaning of TVF is unclear
.Audit reports are unclear to the average reader
.More emphasis on auditors reputation than logic

Question 13

It has been suggested to change TVF to either…..

Answer 13

.Acceptable risk of material misstatement
.Present fairly in all material respects

Question 14

Problems with the current audit report include…..

Answer 14

.The dominance of reputation over logic
.Too dependent on accounting standards and theory which are inadequate
.Impaired by IFRS and GAAP

Question 15

The new phrase ‘Acceptable risk of material misstatement’ would…..

Answer 15

.Better align communication of auditors with the characteristics of accounting information which they evaluate
.Enable users to better appreciate the financial statements

Question 16

The new phrase ‘Present fairly in all material respects’ would enhance the audit report by….

Answer 16

.Creating continuity between successive audit reports
.Providing greater transparency
.Highlighting inconsistencies