Evaluating Whether the Financial Report Evaluating Whether the Financial Report Achieves Fair Presentation (Ref: Para. 14)

Evaluating Whether the Financial Report Achieves Fair Presentation (Ref: Para. 14)

1. Some financial reporting frameworks acknowledge explicitly or implicitly the concept of fair presentation.[22] As noted in paragraph 7(b) of this Auditing Standard, a fair presentation [23] financial reporting framework not only requires compliance with the requirements of the framework, but also acknowledges explicitly or implicitly that it may be necessary for management to provide disclosures beyond those specifically required by the framework.[24]
2. The auditor’s evaluation about whether the financial report achieves fair presentation, both in respect of presentation and disclosure, is a matter of professional judgement. This evaluation takes into account such matters as the facts and circumstances of the entity, including changes thereto, based on the auditor’s understanding of the entity and the audit evidence obtained during the audit. The evaluation also includes consideration, for example, of the disclosures needed to achieve a fair presentation arising from matters that could be material (i.e., in general, misstatements are considered to be material if they could reasonably be expected to influence the economic decisions of the users taken on the basis of the financial report as a whole), such as the effect of evolving financial reporting requirements or the changing economic environment.
3. Evaluating whether the financial report achieves fair presentation may include, for example, discussions with management and those charged with governance about their views on why a particular presentation was chosen, as well as alternatives that may have been considered. The discussions may include, for example:
   • The degree to which the amounts in the financial report is aggregated or disaggregated, and whether the presentation of amounts or disclosures obscures useful information, or results in misleading information.
   • Consistency with appropriate industry practice, or whether any departures are relevant to the entity’s circumstances and therefore warranted.