The Impact Of True And Fair View On Auditor’s Report. (a Case Study Of Union Bank Plc)

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This research work aimed at examining the impact of true and fair view on auditor’s report with particular reference to Union bank Plc. These are the areas that the researcher concentrated while carrying out this research work. The first chapter is the introductory part of the research work. This chapter also contains the background of the study, statement of problems, research Question etc. Data for the study was sourced from two main sources which include Primary and Secondary sources of data collection. Primary data: Questionnaires and oral interviews were used to collect information from the respondents. Secondary data : Journals, magazine and other relevant materials relating to the area of my investigation will be review. Extensive literature review was carried out on direct literature and indirect literature on books, journals and past works. The research instrument used in this study includes oral interview and questionnaire. The questionnaire is structural as to contain both close and open ended question. Simple tables, pie-charts and percentages was used in treatment of data while chi-square was used in the research work. Based on the findings, conclusions were drawn and recommendations were also made in the last chapter of this work which is the fifth chapter.



Title page                                               i

Certification page                                      ii

Approval page                                           iii

Dedication                                              iv

Acknowledgement                                     v

Abstract                                                 vii

Table of contents……                                   ix

Chapter one


1.1  Background of the study…                         1

1.2  Statement of the problem                       6

1. 3 Objective of the study ……                         7

1.4  Research question                                8

1.5 Research hypothesis                             9

1.6  Significance of the study                        10

1.7   Scope and limitation of the study                     11

1.8  Definition of terms                                    11

Reference                                             14


Review of related literature

2.1  The concept of true and fair view                      15

2.2  The practical application of true and fair view    17

2.3  Users of auditors report                               20

2.4  Definition and types of audit                           27

2.5  Audit report and its types                        29

2.6  Audit report and opinion                         30

2.7  Disclaimer of opinion …                           34

2.8   Audit standards                                   37

2.9  General standards …                               38

2.10  Issues concerning audit report                      40

2.11Basis of audit opinion                           48

2.12Audit opinion ……                                50

2.13  Significant uncertainties common in the preparation of financial statements…                          52

2.14 Qualifications of audit report …                   57

Reference                                             60


Research Design and Methodology

3.1  Research design                                 61

3.2  Sources of data                                  62

3.3  Population of the study                                65

3.4  Sample size Determination                      66

3.5  Method of investigations                         67

References                                           69



Presentation and Analysis of Data

4.1      Presentation and Analysis of Result                        70

4.2      Test of Hypothesis                                80


Summary of Findings, Conclusions and Recommendations

5.1 summaries of findings                              86

5.2  Conclusions                                       88

5.3  Recommendations                                89

Bibliography                                       91

Appendix…                                        93

Questionnaire                                     94




The overriding provision of companies and Allied Matters Decree 1990 is that financial statements shall present a true and fair view of the state of affairs of the company and of its profits and source and application of fund for the year ended, and auditors are to confirm it on behalf of their clients.

      But says side both aim (1965) the basic problem of accounting is

      “The insistence on historical cost valuation of assets the disinclination of accord value to intangible assets are deeply embedded in accountancy practice”

      Consequently, it is under argument that the true and fair view concept is after all non existent from the accounting point of view, and by extension to auditing.

      It is known that a statement of assets valued at historic cost is surely true, but may not be fair to the extent that money values have changed or alternations made in the production or trading circumstance of the firm. On the other hand, revaluing assets to current prices might be fair, but would only be true in the sense that it is a representation of someone’s opinion. Thus, a valuation might be true but not fair or fair but not true.

      Also because stocks are valued at cost or lower, and depreciation provisions are tied to historic cost, profit measurement are true in the pure by accounting sense. On the other hand, to revalue inventories at selling price would be to anticipate profits not realized and to adjust depreciation rates to replacement values would in values subjective judgment. Thus, a fair statement of profit might only be true in the special sense that it is someone’s opinion of truth.

      Furthermore, though published accounts are meant primarily for shareholders, reliance can still be placed on it by a variety of other users. Hence, what might be either a true or fair statement with regard to one class of people might be so true or less fair with regards to another.

      Those structural inadequacies in accountancy practice, it can be seen tends to cost aspiration on the very process of auditing as it purports that in the very first place the financial statements on whose truth and fairness the auditor is reporting in inherently unreliable.

The ‘true and fair view’ concept is one of two competing but not mutually exclusive legal standards for financial reporting quality that have been subject to debate on their meaning, use and importance. The other is ‘present fairly in conformity with generally accepted accounting principles’.1 While the former is closely identified with judgment and is used in the United Kingdom (UK), the European Union (EU), Singapore, Australia, and New Zealand, the latter is the standard for United States (US) financial reporting and tends to be more rule based (Hopwood, Page, & Turley, 1990).

Both terms have a long history in financial reporting. ‘Present fairly in accordance with GAAP’ first appeared in US financial reporting regulation in 1939 (McEnroe & Martens, 1998) and ‘true and fair view’2 in the UK Companies Act 1947 (Parker & Nobes, 1994). The International Accounting Standards Committee’s (IASC) latest version of International Accounting Standard-1 (IAS-1), operational for periods beginning on or after 1 July 1998, adopts both concepts. It requires fair presentation and disclosure of compliance with IAS and a limited ‘true and fair view’ override if compliance is misleading (IAS-1, 1998).

New Zealand has tended to follow the UK example, especially in early legislation (Zeff, 1979; Hopwood, 1989; Parker, 1989; Nobes & Parker, 1994). Until 1993, New Zealand law (Companies Act 1955) included a schedule of rules for auditing and accounting, together with the overriding requirement for a ‘true and fair view’. However, New Zealand appears to be moving away from ‘true and fair’ as a literal concept to a more technical meaning that also requires compliance with a set of rules (Porter, 1995). The Companies Act 1993, in conjunction with the Financial Reporting Act 1993, requires financial statements that comply with generally accepted accounting principles (GAAP) and an additional requirement of ‘true and fair view’. Prior to the passing of the 1993 Acts, companies could use the legislative power of ‘true and fair view’ to avoid complying with GAAP. The 1993 legislation effectively removed this option for companies that are reporting entities. Thus the ‘true and fair view’ rule is now overriding only in the sense that, while complying with GAAP is a legal requirement, directors still have the obligation to provide additional information to ensure that the financial reports represent substance as well as form (Porter, 1995, Mathews & Perera, 1993). Following a diverging path from UK influences, the Institute of Chartered Accountants in New Zealand (ICANZ) also uses the terms ‘fairly reflect’ and ‘fair presentation’ and states that the terms are equivalent (NZSA, 1995). This may signal a move away from ‘true and fair view’ towards the US requirement for ‘fair presentation’.


An effective information system is  very important for the functioning of any business. The financial accounting system in most business do not portray fully the principles of accounting systems.

Financial accounting  information involves technicalities such as quantitative analysis adequate recording reporting etc. Some business organization may unknowingly employ incompetent and unskilled manpower and as such the financial accounting information  prepared may not show a true and fair  view of the financial strength profitability and future prospects of the organization.

Some organization have to realism that accounting information is the only medium through which both the management and external users get a clear picture of an organization. If they fail to realizes appreciate an accountants analysis inrespect of the accounting information  generated, this  often leads to poor management decision which will have negative effects on the performance of business organization.


The main objective of this study is to examine the impact of true and fair view on auditor’s report. Apart from this major aim the study will also find out the following:

1.          To determine the impact of true and fair view on the financial statement of Union Bank Okpara Avenue Enugu

2.          To ascertain whether there is a direct relationship between financial statement  and the decision making in Union Bank Okpara Avenue Enugu.

3.          To ascertain whether there is a direct relationship between financial statement and profit planning in Union Bank Okpara Avenue Enugu.


(i)         It is there any impact of true and fair view on the financial statement of Union Bank Plc. Okpara Avenue Enugu

(ii)       What are the relationship between financial statement and decision making in Union Bank Plc. Okpara Avenue Enugu.

(iii)     What are the relationship between financial statement and profit planning in the bank.

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The Impact Of True And Fair View On Auditor’s Report.