On 15th July 2013, the Archbishop of York, the Most Revd and Rt Hon. John Sentamu, took part in the Report Stage of the Government’s Local Audit and Accountability Bill. The Archbishop queried the inclusion of the term “fair view” in an amendment on a clause dealing with the general duties of auditors. The amendment, tabled by the Government, was agreed to.
The Archbishop of York: My Lords, on Amendment 12, if the statement is true, are not the words “fair view” fatuous? Could you have a true statement which needs qualifying as being unfair? If it is true, it is true. Are those warm words, are they warming up the word “true”? What do they add, those words “fair view”? If it is true, it is true.
Lord Palmer of Childs Hill (Government response): My Lords, unfortunately in accountancy there is a certain jargon. “True and fair view” is jargon used by firms of accountants and auditors from time immemorial, probably since the formation of the Institute of Chartered Accountants of Scotland, which was the first institute.
My query is whether this is not something which could be included in the external auditors’ audit report in the normal way. Currently, the external auditors’ audit report will say that the accounts have been true and fair and all the other jargon that goes with it in a format which has evolved over the years. The amendment seems to provide that the auditors must be satisfied that the local authority presents its accounts in a true and fair way. If that be the case, I wonder whether my noble friend can say, either now or in writing, whether the auditors’ report itself will need to be amended. Currently, the auditors’ reports just say that the accounts are, in their opinion, true and fair—or words of that nature. Now we seem to be saying that the external auditor must be satisfied that the local authority has presented its accounts in a true and fair way, which seems to be going beyond the opinion that those figures are true and fair. I know that we have a jargon and that the statement should be true but not fair seems completely wrong, but this is a form of words which has been used by accountants for years and is being replicated in the Bill.
The Archbishop of York: Does not the noble Lord think that a legislature is entitled not purely to accept jargon, however old it is, because the law needs to be very clear about what it is stating? Yes, jargon may have been there for centuries. In the council of the Church of England, the jargon is well known, but when we draft a Measure to come to your Lordships’ House it will be in a language understandable by the people. So yes, that may be the jargon, but what is the meaning? What is it getting at? Do you still have to keep jargon when you are legislating?
Lord James of Blackheath (Government response): My Lords, my attempts to help in this House usually end up in worse confusion, but let me try. I raised the same question about 40 years ago when the phrase was first coming into regular usage. The explanation I got at the time was that the accounts will be true but they may not be fair because they do not answer the question which accountants never ask at an audit stage: that is whether there is a working capital certificate sufficient to support the cash flow. Therefore, you have to say that the accounts are true, but they may not be fair because they may not highlight the pitfall that the cash is going to run out. So “true” and “fair” belong to each other, but they have a separate and subtly different meaning.