AP Vol. 6 No. 1 — PC vol. 6, no 1 (2007) pages 1–20
AUTHOR:
STEPHEN A. ZEFF
ABSTRACT:
In this paper, the author examines the historical evolution in the United States of the use of the term “present fairly” in the auditor’s report, as well as the experience and arguments in the United States and Canada regarding the use of a “two-part” opinion in the report. He then develops an argument for the adoption of a “two-part” opinion, decoupling “present fairly” from conformity with generally accepted accounting principles, which would place primary emphasis on “present fairly”.
Keywords: Auditing standards; Auditor’s report; Present fairlyFULL TEXT: FREE DOWNLOAD
Origin of “Present Fairly”
The origin in the United States of the term “present fairly” in the standard form of the auditor’s report may be traced to the report of a special committee set up in 1932 by the American Institute of Accountants (AIA). After engaging in correspondence with the New York Stock Exchange (NYSE), the special committee recommended the “modern” form of the auditor’s report, whose opinion paragraph included the wording “fairly present, in accordance with accepted principles of accounting” (AIA, 1934: 31). Walter A. Staub, the senior partner of Lybrand, Ross Bros. & Montgomery and one of the six signatories of the special committee’s letter to the NYSE of December 21, 1933, in which it recommended the format of the auditor’s report, wrote in 1942 that the committee meant that the auditor should give separate opinions on “fairly present” and “in accordance with accepted principles of accounting” (Staub, 1942: 75). Perhaps the comma between “fairly present” and “in accordance with accepted principles of accounting” was intended to signify a disengagement of the two elements into two separate opinions.
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