The 'true and fair view' : the perceptions of Maltese bankers

Abstract

Purpose: The primary objective of accounting information is decision usefulness. Auditors have been expected to express opinions on financial statements on whether they show a "true and fair view" (TFV). "True" and "fair" are but two of a long history of undefined qualitative expressions the law uses to describe a standard for external reporting. The objective of this study is to document the perceptions of the TFV concept for Maltese bank managers as one of the main users of financial information with respect to their interpretation and relevance of the concept. Design: Research was conducted by means of a survey questionnaire sent to all bank managers in charge of granting commercial loans residing in the four main bank branches in Malta and Gozo being HSBC, BOV, Lombard and APS. Findings: Findings indicated that bankers as users of financial information interpret the TFV concept as essentially meaning accuracy and correctness. They are able to distinguish between truth and fairness. Their concern lies in the fact that although they think that in part financial statements that follow IFRSs are more likely to show a TFV, they are concerned that financial statements may show a healthier picture than in reality and lack of relevant information following over detailed rules causes chaos and confusion. Reliance on the auditors' opinion is clearly lacking and is only relied upon in part. Value: Results showed that financial information on its own is not enough for bank managers in order to assess the realistic TFV of the client. Non financial information and additional financial information based on current values rather than historical ones are needed in order to enhance credibility in the client. Clearly an expectations gap exists between the intended objective of financial statements and current reality.