Some have ‘material’ and some don’t
Have you noticed that unqualified audit reports of quoted companies in the UK are not exactly the same? This is yet another of the silly things auditors do.
The immense majority of audit reports make the following statement:
“In our opinion the Financial Statements give a true and fair view of the state of the Group’s and of the Company’s affairs …”
These are emphatic and to the point. How can you get any better with an unqualified ‘true and fair view’?
Just a few, and one has to search to find them, water down the ‘true and fair’ with the following statement:
“In our opinion the accompanying consolidated financial statements give a true and fair view IN ALL MATERIAL RESPECTS of consolidated equity and …” (See note below).
These, of course, are my capitals. There is no effort on the part of these auditors to emphasise this qualification. They just slip it in, I suppose, and hope that nobody, like me, will notice or comment on it.
What, I wonder, is the difference between a ‘true and fair view’ and a ‘true and fair view, in all material respects’? Should a shareholder worry about it? It certainly doesn’t sound the same: one is clear and direct, the other is watered down, just a little. But why?
Could it be that some immaterial statements have been included in these financial statements which don’t make a difference, but should be highlighted? Readers are kindly asked to search for them.
If there is no difference, why put in the qualification? Auditors after all, are intelligent qualified people, and it cannot be an oversight. If the qualification is unnecessary, as I suspect it is, why leave it out, not put it in and tell us about it? And why do a few decide to put it in?
But there is not really a mystery at all; it depends where the company is registered. The International Consolidated Airlines Group, for instance, (British Airways to the ordinary person), is registered in Spain, so their audit report has the qualification, ‘in all material respects’.
Those registered in UK following the Companies Act for their reporting have no qualification. These audits must be stronger and more complete that the others!! How odd is that?
Note: Phrase taken from the auditor’s report of the International Consolidated Airlines Group (IAG) at 3Ist December 2020, page 214 of the Annual Report and Accounts 2020.