There is no formal (legal or professional) definition of the term “true and fair view.” However, from general usage, the meaning of the term can be looked at from its components, namely:

• True: The accounts are free from material misstatements and reflect the underlying records.
• Fair: Implies that there is no undue bias in the financial statements or the way they have been presented.

Additionally, it suggests that judgment exercised in the preparation and auditing of the financial statements is properly aligned with appropriate financial reporting standards. Both directors and auditors must exercise judgment to ensure that the financial statements provide a “true and fair” or “present fairly” assurance, in line with financial standards, and that they can be relied upon.

(5 marks)