Task 1.

2
Comment on the ‘true and fair view’. As being an auditor
can you guarantee that the financial statements are true
and fair?

‘True and fair view’ means that the information is factual, exists and free from
discrimination and biasness. This also states that the accounts are generated
correctly extracted from books and records.

The External auditor cannot guarantee the true and fairness of the financial
statements, but provides a statement based on his ‘opinion’ which is generated from
audit evidence. This is not an opinion of absolute correctness. As he does not check
every transaction but on a test basis, he therefore gives a reasonable assurance
rather than absolute assurance.

Audit and Assurance, Kaplan Global (2012)

Discuss the enhancing characteristics of comparability,

verifiability, timeliness and understandability?

Comparability, verifiability, timeliness, understandability are qualitative

characteristics that enhance the usefulness of the information that is relevant and
faithfully represented.

 Comparability

Helps users see similarities and differences between events and conditions. It is the
quality of information that “enables users to identify similarities and differences
between two sets of economic phenomena” (IASB, 2008:39). Comparability includes
comparing the financial statement and position with their previous year and with the
different company’s financial statements and position.

 Verifiability

There are two types of verifiability of direct and indirect. Direct verifiability means
verifying data through direct information. Indirect verifiability means checking input
through formulae and recalculating the output amount. The term objectivity often is
linked to verifiability whereas subjective measurement is difficult to verify.

 Timeliness
means having “information available to decision makers before it loses its capacity
to influence decisions” (IASB, 2008: 40). To enhance timeliness, the registrants
should submit financial statement information on a quarterly and annual basis for
each fiscal year.

 Understandability

means that users must understand the information within the context before he
makes any decisions. Users are assumed that they have reasonable knowledge of the
business activities. They are willing to study information in subject to reasonable
diligence.

Financial Reporting, Kaplan (2013/14) pg144-5

Mcgraw-hill higher education (2007)

http://connect.mcgraw-
hill.com/sites/0077328787/student_view0/ebook/chapter1/chbody1/qualitative_cha
racteristics_of_financial_reporting_information.htm [Accessed on 07/jan/2014]

www.ru.nl/publish/pages/516298/nice_09108.pdf [Accessed on 07/jan/2014]