📘 What is the Meaning of “True and Fair View” in Auditing?
Let’s say your friend tells you:
“I scored 80 marks in the exam.”
Now you check their paper and see that:
- They really got 80 marks (not lying) ✅
- They didn’t hide any subject where they failed ✅
This means what your friend said is TRUE and FAIR.
Now think of this same idea in auditing.
When an auditor checks the accounts of a company, their job is to see whether the accounts show a True and Fair View.
Let’s break this phrase into two parts:
🔵 1. What is “True”?
“True” means all the figures in the accounts are correct.
👉 No wrong totals
👉 No fake entries
👉 No lying about profit or cash
💡 Example:
If the balance sheet shows ₹1,00,000 in bank, the auditor checks the bank statement to confirm it’s true.
🔵 2. What is “Fair”?
“Fair” means nothing important is hidden.
👉 The accounts should not be made to look better or worse on purpose.
👉 They should not hide losses, hide loans, or trick investors.
💡 Example:
If the company has taken a loan of ₹5 lakhs, it must be clearly shown in the balance sheet.
✅ Why Is “True and Fair View” Important?
Let’s understand why this is the heart of auditing.
🔹 1. To Help People Make Decisions
People like:
- Investors
- Banks
- Government
- Company Owners
…look at audited accounts to take big decisions — like giving loans, investing money, paying tax.
If the accounts are not true and fair, these people may take wrong decisions.
🔹 2. To Build Trust
If the auditor says “These accounts show a true and fair view,” it means:
✅ The business is showing real figures
✅ There is nothing hidden
✅ The report is trustworthy
This one sentence builds trust in the whole report.
🔹 3. To Follow the Law
Auditors must follow audit standards and give a final opinion based on whether the accounts are true and fair.
If they are not, they must say so in the report (this is called a qualified report).
📊 Small Table – True vs. Fair (in Simple Terms)
| ✅ Word | 💬 Meaning | 💡 Example |
|---|---|---|
| True | Figures are correct | ₹5,000 in books = ₹5,000 in bank |
| Fair | Nothing important is hidden | Shows all loans, losses, expenses |
📸 Image Suggestion 2
✍️ What the Auditor Writes in Report (Real Example)
“In our opinion, the financial statements give a true and fair view of the financial position of the company.”
This line means:
✅ Auditor has checked everything
✅ The company is being honest
✅ People can trust the accounts
📌 Conclusion – True and Fair = Honest + Clear Accounts
The main job of the auditor is to confirm if the company’s accounts are:
- ✅ True → Everything is correct
- ✅ Fair → Nothing is hidden
If both are there, then the audit report helps everyone — from students to investors — to understand the real picture of the business.
🧠 Remember:
An account full of numbers is only useful if it’s true and fair.