The true and fair view: exploring how managers, directors and auditors engage in practice

Financial reporting regulations and codes throughout the world require directors to declare that financial statements comply with applicable accounting standards and give a “true and fair” (or equivalent) view. External auditors are then required to provide an opinion on whether those two requirements are achieved. This study provides case-based insight into how managers, audit committee members, and external auditors engage with the true and fair concept in preparing financial statements. All interviewees valued the concept, arguing that it enabled robust discussion. For managers and audit committee members, it facilitated thinking and debate about underlying commercial substance. While compliance with accounting standards was perceived to achieve a true and fair view in most circumstances, there were exceptions. In some cases, managers responded by proposing the inclusion of disclosures which went beyond the requirements of accounting standards. However, external auditors were reluctant to endorse content which did not directly align with accounting standards. Our study contributes to debates regarding both the meaning of true and fair, and its ongoing utility.