Conformity and conservatism - external auditor report, Auditing

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Conformity and Conservatism - External Auditor Report

Conformity

Although the user of the accounts expects the accounts to conform to general accepted accounting principles and the IFRSs, simple rigid conformity can lead to a misleading view. Since whether we simply included profits from overseas branches and if those benefits are not obtainable to shareholders because of exchange control restrictions, so then the accounts would be as misleading.

Conservatism

The concept of prudence is highly esteemed in the accounting profession.  However, taken to extremes it could result in accounts not giving a true and fair view as in the case of long term construction contracts, contingent liabilities and in substance over form transactions.  An accountant is a pessimist through nature since the auditor must guard against over conservatism.


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