History - True and Fair
International Standards on Auditing (ISAs) make it quite clear that the terms 'true and fair' and 'present fairly' which are used in audit reports in many other countries, mean the same thing. There is no definition of either term in legislation or standards anywhere. Although both have existed for long time.
IAS 1 (revised) Presentation of Financial Statements states that financial statements should 'present fairly' the financial position, cash flows of and performance and enterprise and goes on to state that financial statements prepared in accordance with IASs (with additional disclosures if necessary) will generally result in fair presentation. The 'true and fair' override, as used in the UK, that allows any accounting standard to be departed from, in the interest of giving a true and fair view, is only to be applied on 'extremely rare circumstances'. The term true and fair was first used in the UK, where it originates, in legislation of 1948. However, prior legislation had used similar phrases.
Companies legislation dated 1844 required UK companies to present a full and fair balance sheet, though the meaning of this phrase was never defined. A company was required to keep full and true accounts. By 1900 the auditor was required to state whether the balance sheet was properly drawn up so as to exhibit a true and correct view. This phrase was retained until 1948. The US Companies Act Cap 486 is based on the UK Companies Act of 1948
At no stage has any legal definition of the meaning of these terms been provided. ISAs does not set out what is meant by either 'true and fair' or 'present fairly'.