THE CONCEPT OF TRUE AND FAIR VIEW IN THE
KNOWLEDGE SOCIETY
Ioana Balan
“Alexandru Ioan Cuza” University, Doctoral School of Economics
Iasi, Romania
ioana_balan85@yahoo.com
Abstract
Nothing is accidental. Everything is running as designed and implemented as a plan.
Mankind has progressed, progresses and will progress only through knowledge. The
importance of this process and the amplification of globalization lies in business turbulence,
leading inevitably to increasing competition, particularly in saturated markets of products
and services. As response to new fields of force generated in the external environment,
organizations should not focus on immediately profit but to chose obtaining competitive
advantage and transforming it into a strategic advantage. Knowledge is the competitive
advantage. It depends how it is accessible and transparent to investors. On the other hand,
knowledge is based on the information. Information is the raw material of many decisionmaking processes. Decision as intellectual product processing of information is given by the
quality of information. All these elements compete to provide accurate, true and fair view to
investors, a concept that is based around the business world. Quality, transparency and
reliability of the information also depend on decisions taken action to invest or to withdraw.
Given the current crisis in antithesis with the findings from various areas of activity we
believe that this article will fit well in your theme.
Keywords: knowledge, knowledge society, intangible assets.
1. INTRODUCING THE CONCEPT OF TRUE AND FAIR
VIEW
Freedom and conformity is, after Professor Michael Ristea [1] an equation
of the relevance and credibility of information presented in financial statements.
Relevance is designed for the purpose of providing knowledge that is useful in
making economic decisions effective nature of an entity's financial position and
performance accounting. The concept of credibility, on the other hand, means that
information does not contain significant errors, it is not biased, and users can be
confident that accurately represents what they have proposed to represent, or what is
expected, reasonably to represent. When these two concepts involved is necessary if
the accounting system problem or not really able to give an objective and impartial,
and a message. The idea and application of categorical excessive and unfairly
generalizing, even if their support can bring scientific authority Cibert A. French
teacher [2], which states: “There are as many truths are and how many recipients of
information to the extent that it excludes quality, reducing the effect of each
measurement is inevitable”. And to be even more persuasive call to P. Lasseque, B.
Colas and D. Boussard they admit that “the truth “said by accounting is only a filter
that allows understanding of reality”. However, due to its internal consistency,
which gives force and also weakness, accounting allows to reach a formal truth
based on several postulates conventions, rules, rules of classification. The question
“is accounting giving the truth?” can be answered in Pirandello's style “Each with
his truth”. Consequently, different actors is a challenge for social truth faithfully
rendered image on the financial position and performance must be sought according
to the interests of producers and users of information. Truth can not be provided by
accounting for users than the result of a compromise between the expectations and
requirements, and for manufacturers, a relationship between sincerity and regularity
(the principles and fundamental rules). In this context of economic truth offered by
the accounting system makes its presence felt and the concept of true and fair view.
The notion of image fidelity (true and fair view) is of British origin, and
one of the few definitions belongs to Lee [3], which in 1982 stated: “Today, the
image became a true art within. It involves the presentation of accounts prepared in
accordance with generally accepted accounting principles, the use of numbers as
accurate as possible, making as reasonable estimates and arranging them so as to be
able to provide all current accounting practices within the objective image possible,
free of errors, distortions, manipulations or significant omissions”. So the British
perception of the principle of the social protagonists (producers and users of the
product sheet) is considering accounting standards and law. In the theoretical picture
is defined in terms of fair terms of true and accurate picture image or true and honest
picture [4]. We do not exclude any interpretation that a high goal toward which the
financial statements [5]. In accounts based on normative regulations, true image as
an objective of financial accounting terms is defined in terms of regularity and
sincerity.
IASC accounting framework does not directly address the concept of true
and fair view. The ideas in this respect are general par excellence as follows:
financial statements must render a true and correct and present fairly the financial
position should the results and changes in financial position, of an enterprise. At the
same time it is issued and the idea that the main qualitative characteristics and
application of appropriate standards by accounting has typically resulted in the
preparation of financial statements reflect a true or fair presentation of financial
statements.
On the other hand, the notion of true and fair audit is clearly defined in a
general way, however, true image is a concept that can not be dissociated from the
regularity and sincerity accounting [6].
Regularity [7] requires conformity to rules and accounting procedures, so to
generally accepted accounting principles; Romanian accounting regulations provide
otherwise, that to give a true heritage, financial position and results must be
respected heritage assessment rules and other rules and accounting principles, such
as:
- prudence: prudence requires reasonable assessment of the facts in order to avoid
the risk of future uncertainties present transfer likely to strike assets and financial
results of the enterprise. According to this principle is admitted overstatement of
assets and income, understatement of liabilities and expenses, taking into account
depreciation, risks and possible losses arising from current year or previous activity;
- the principle of consistent methods - which leads to the continuity of application of
rules and procedures for assessing, recording and presentation of accounting and
economic elements of the results, while ensuring comparability of accounting
information;
- going concern - that the asset is assumed that the unit continues normal operation
in the foreseeable future, without going into liquidation or significant reduction of
activity;
- the principle of independence of the year - while involving delimitation of revenue
and expenditure for the work unit on the property since their employment and their
transition to the profit or loss to which it relates;
- the principle of inviolability of opening balance sheet of an exercise which must
correspond with the balance-inch of the previous year;
- netting principle - that the assets and liabilities should be measured and recorded in
separate accounts are not permitted offset between asset and liability balance sheet
and income and expenses between income statement.
Honesty requires good faith application of accounting rules and procedures,
depending on the knowledge that leaders must have accounts on the reality and
importance of operations, events and situations in the enterprise. The objective of
the audit of financial statements is to enable the auditor to express an opinion that
financial statements have been established, in all their material, in accordance with
an identified reference sheet.
To express this opinion, the auditor will use one of two formulas are equivalent:
-“give a true and fair”;
-“present honestly, in all their aspects significant.”
Although the auditor's opinion enhances the credibility of financial statements, the
user can not infer from this that it offers durability and cost-effective or efficient
management of the entity by its leadership.
On the other hand, resorted to IAS 1 “Presentation of Financial
Statements”, the equation accounting compliance and liberties can get the form [8]:
= line + freedom consistent with some default + possibility to derogate from the
relevant regulatory + additional information + professional reasoning in selecting
accounting policies. “An entity whose financial statements comply with IFRSs must
disclose in the notes an explicit and unreserved statement of such compliance. An
entity shall not describe financial statements comply with IFRSs as unless they
satisfy all the provisions of IFRS. In almost all cases, an entity makes a fair
presentation by compliance with applicable IFRSs. Also, a fair presentation requires
an entity [9]:
 select and apply accounting policies in accordance with IAS 8 "Accounting
Policies, Changes in Accounting Estimates and Errors". IAS 8 sets out a
hierarchy of value-time guidance that management consider if no IFRS applies
specifically to an item;
 to provide information including accounting policies in a manner that provides
relevant, reliable, comparable and understandable;
 to provide additional disclosures when compliance with certain provisions of
IFRSs is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the financial position and financial
performance of the entity. “An entity can not rectify inappropriate accounting
policies either by presentation of accounting policies used nor by notes or
explanatory material. In extremely rare cases in which management concludes
that compliance with a provision of an IFRS would induce so much in error that
would be inconsistent with the objective of financial statements set out in the
Framework, the entity shall depart from that requirement if that regulatory
framework provides relevant such violation or not otherwise prohibited”.
2. CRITERIA FOR ASSESING THE TRUE IMAGE
For accounting information to respond to the need to reflect the true picture
of the economic situation, financial and outcomes of an enterprise or group of
companies it must meet certain quality criteria [10]. The main qualitative
characteristics that financial information must meet, in view of the IASC are:
understandability, relevance, reliability and comparability [11]. According
intelligibility is necessary that the information can be easily understood by decision
makers, given that they have sufficient knowledge about doing business and
economic activities. Relevance means that information must allow to influence
economic decisions of users and supporting these events both present and future
evaluation, as well as assessments made in the past. Relevance of information is
related to the nature and materiality. Such information is material if its omission or
misstatement in financial statements could influence economic decisions of users.
The credibility is based on the premise that the information developed is free from
material error is not biased, and users can be confident that it accurately reflects the
reality of organizations. In turn, this feature is subject to: fidelity representation,
substance over form, neutrality, prudence and completeness. Comparability of
information is the feature that allows comparisons over time and space [12].
On the other hand, in view of the body to normalize U.S. FASB accounting
information must meet two important qualitative features, namely the relevance and
reliability. Relevant criterion means that accounting information is likely to change
determmine decisions. Reliability, on the other hand, offers a guarantee that users
can trust the information broadcast accounting. This last criterion implies
necessarily verifiability, loyalty and neutrality. It also establishes a threshold FASB
accounting financial information [13], given the constraints that always manifests
inequality as “benefits to> cost”. This restriction is known as the significance or
materiality. An item of information has significant value if it is able to influence
decisions of users. Materiality of an item also depends on the size and nature.
Between materiality and relevance of multiple interferences occur because both
concepts are defined in relation to the influence they have on users. Therefore the
materiality of information is difficult to assess due to a problem the difficulty in
assessing the benefits it brings an element of information. In terms of audit should
ensure that these criteria have been met when preparing the financial statements
[14]:
 completeness;


reality;
proper recording and accounting and disclosure in financial situation of
operations.
Completeness criterion (integral) refers to the fact that all operations concerning the
organization are recorded in the accounts. The term "operations" includes all rights
and business assets and liabilities and all its obligations and, in a general way, any
event or decision that involves a change in the assets, financial position or financial
result of that undertaking. Reality criterion requires that all the material operations
of scripts correspond to the physically identifiable and that all assets, liabilities,
income or expenditure and does not reflect the real values that do not look fake or
undertaking, in other words, all information presented the financial statements must
be substantiated and verified. Correct recording accounting and disclosure in the
financial statements of operations assume that these operations must:
be recorded in the corresponding period, thus aiming to respect the independence
years, the criterion of correct period:
 be properly evaluated, that amounts to be quite specific, exact arithmetic,
aiming at compliance with all rules and accounting principles and methods
of evaluation, so the correct evaluation criteria;
 to be accounted for in the appropriate accounts, so correct imputation test;
 be properly aggregated, centralized, so that a presentation be provided in
the annual accounts comply with the rules, the correct criterion in the
annual accounts presentation.
So true and fair view concept of equivalent, as demonstrated by the Anglo Saxon
pragmatism, with a real vision obtained through fair presentation of the company.
This concept is at the same time a challenge, an incitement to accounting research
and reflection, professionals are obliged to pursue a legal permanent if the
application does not ensure true and fair view or are looking for. By addressing
multiple criteria to be observed on the concept of true and fair view has moved from
stage to ensure that the accounting rules are correctly applied the legal stage where
enforcement is carried out in close correlation with the image broadcast to users so
that it to express the reality of the object represented. As as a result of compliance
with the criteria for assessing the true picture, the transition occurred at the stage
where only the correct application of the rules to be applied (static played a leading
role) in the enforcement phase is analyzed in close correlation with the image
broadcast users so that it can express the objective reality represented (providing an
enemy, creative)
3. MATERIALTY
Under ISA 320, “Information is material if its omission or misstatement
could influence economic decisions of users taken on the financial statements.
Materiality depends on the size of the item or error judged in the particular
circumstances of its omission or misstatement. Thus, materiality provides a
threshold rather than being a primary qualitative characteristic which information
must have in order to be useful “[15]. Materiality [16] (the level of material) will be
adopted in relation to the value that determines whether errors, omissions or errors
identified in the accounts, taken individually or cumulatively, indicate whether the
accounts give a true, complete and accurate result, financial situation and the status
of the company. In general, the materiality means the size of a sum over the auditor
believes that an error, an inaccuracy or omission may affect the regularity and
sincerity of the financial statements and fair view of the results, financial position
and status of the company. In other words, materiality is what the Anglo-Saxon
accounting called the error in the understanding and interpretation of financial
statements will not be significantly affected.
In terms of the engagement [17], the objective of the audit of financial statements
the auditor is expressing an opinion, the financial statements give a true picture of
transactions and the economic entity's financial position for the period audited.
Therefore, in order to be able to express an opinion, the auditor should ensure that
there is a reasonable certainty that all important elements that could affect his
opinion were fully considered. To achieve this goal, audit procedures should be
designed so as to provide reasonable assurance that all issues have been discovered
significant impact on the financial statements. It should be noted that materiality is a
subjective and depends on the establishment of the auditor's reasoning and
experience.
Under the calculation mode, the minimum standards of audit [18] proposed one of
referential choice as a value in the range:
 1% - 2% • total assets (before debt reduction)
 0.5% - 1% • turnover;
 5% - 10% • profit before tax.
It believes that it best reflects the performance of an entity. If the level of materiality
is set at 10% of the profit, which equals or exceeds the error threshold, individually
or cumulatively, are considered significant errors. The auditor will have to pay
attention. According to ISA 320 “The auditor should consider the possibility of
misstatements of relatively small amounts that, cumulatively, could have a
significant effect on the financial statements. For example, an error in a month end
procedure could be an indication of a potential material misstatement if that error is
repeated each month“[19].
Another way of sizing of materiality is based on deviations (variations) [20]. Thus,
the same percentage as before, except that for each amount, unless the total value of
the indicator, is calculated and deviation (variation) in the way. Finally, consider the
appropriate materiality as the highest value on the line for the effects of higher
(lower audit risk). If higher audit risk, materiality is taken as the lowest of the
corresponding line of the smallest variation. If total profits before tax differs, are
declining or entity recorded a loss, apply the same procedure, only consider the
materiality variations corresponding values obtained in total assets and total
revenues (turnover). Similarly, if one is not significant indicators for the entity, may
be taken into account equity.
Therefore, materiality may be chosen in several ways. An important role for this lies
auditor through professional reasoning. It depends on the auditor, his experience at
that level materiality sized so as to capture all material respects.
4. KNOWLEDGE SOCIETY AND INFORMATION SOCIETY
At present mankind is in a postindustrial era. It is dominated by technology.
Wealth is created where the force acting on new technologies developed through the
knowledge.
4.1 Data, information, knowledge, society
Modern society is characterized by the phenomenon of development, a process that
puts his mark on accounting seriously. To see the implications that this field of
activity it involves financial accounting side as we considered appropriate to define
the two concepts and the implications they bring economic life.
A new aspect of knowledge is an economic factor [21]. In the last 500 years, notes
Laurence Prusak [22], factors of production were land, labor and
capital, neglecting the role of knowledge as a distinct factor of production. For
Prusak, knowledge is intellectual capital, which teaches an organization, “there is no
sustainable advantage other than what a company knows how to use what he knows
and how fast can learn something new”. Another author, Bohn [23] shows that this
is important to understand the technological knowledge, knowledge about how to
produce goods and services. It makes a distinction between data and information.
Also, between information and knowledge. Measurement data directly from one or
more variables. Information is data that were organized or structured in some way,
placed in a context, and meaning. The information shows the status of the
production system or part of it. Knowledge is more. It seeks to understand the
process, to produce causal associations, to make predictions, make decisions
prescriptive.
In this context we can say that the knowledge society [24] is more than only the
information society and information society, summing them actually. Knowledge is
information with meaning and operating information. Therefore the knowledge
society is possible only grafted on the information society and can not be separated
from it. At the same time, it is more than information society by the major role that
is information-knowledge society. The best of the knowledge society is perhaps
understandable that the information society and knowledge.
4.2 The fragility of knowledge society
The vulnerability of the Internet brings a new vulnerability in society. Nico Stehr
[25], but found a number of issues fundamental nature of the fragility of the
knowledge society itself: “It is precisely knowledge and technology is perhaps the
most That Significant sources of the open, indeterminate society is growing up
around us That today. [...] Society has become more fragile. Yet it is neither the
cross-cloud globalization nomization of social relations that is reponsible“
Knowledge societies of the future will be characterized by a wide range of
imponderabilities, unexpected reversals and other unpleasant surprises. The
increasing fragility of knowledge societies generated new kinds of moral Will
questions, as well as who or what questions to our society is responsible for political
stagnation's oft cited. [...] Above all Modern societies have characterized by “selfgenerated” structures and the capacity to establish themselves their future - and
consequently the potential for by the self-destruction.
5. ABOUT THE ROLE OF INFORMATION IN THE NEW
ECONOMY
Thomas S. Wurster referring to Philip Evans in their volume [26] them on
the activities of an enterprise by two elements: information and things. Physical
world through information production takes the form of an activity so that the
economy is an economy of information combined with an economy of things that
are fundamentally and qualitatively different. On the other hand, Wurster and Evans
[27] develop a theory of information richness and reach, which interprets the
economic effect of information in context relative separation, but pronounced the
physical things. The theory applies if the main product is information.
Wealth (richness) information is not only the amount of information but in addition
refers to interactivity, to the extent that can be specially prepared for the recipient,
the accuracy of information, security information etc. Wealth of information is in
fact the quality of information. Achieve (reach) information means the number of
people who can get some information. Wurster and Evans found that as long as the
information is contained in physical things delivered, there is a basic law governing
its economy: the increasing wealth of information, the less they achieve. This can be
understood in terms of easy and intuitive.
6. INTANGIBLE ASSETS
With respect to intangible assets, a recent European Commission study [28] as
Denmark, Sweden and the Netherlands have shown a keen interest in intangible
property since 1995. In Denmark, in 1998, was issued a study "”ntellectual Capital
Statements Danish Project”. Since 1998, the UK, this problem is given great
attention. The UK Government published in December 1998 a report entitled
“Building the Knowledge Driven Economy" which has a chapter dedicated
intangible assets. The report considers that the knowledge society requires a public
policy review. Due to launch a "Value Creation in the Knowledge-Driven
Economy”.
In France, Italy and Germany, as the report reveals an interest in innovation and
knowledge and human capital as key factors in any economic policy.
Intangibilelor economic impact for the European Commission has become a priority
in the new economy.
The U.S. has recently issued a report on employment for the new economy [29].
The problem of the foundations of economic thought in terms of the knowledge
society must be examined carefully, particularly the achievement of sustainable
society because, in addition to economic effects of information and knowledge
currently in force could lead to important changes in the way of conceiving the
economy.
If we want to summarize, it can be said about the new economy that it comprises:
digital economy (Internet market) + recognition of intangible value especially
knowledge + sustenability assurance company in relation to the environment + new
economic rules what caused the first three requirements.
7. CONCLUSIONS
The new economy is becoming more important in business spectrum of highly
developed countries, demonstrating the decisive role played by nature intangible
elements in achieving competitive advantage of companies. These items are hidden
but the value of a company because it is the intangible resources
company that can not be measured by financial metrics used to measure tangible
resources. Should be noted that their influence is taken into account especially in the
development process of knowledge-based organizations. From an accounting
perspective the recognition and evaluation of the contribution of these elements is
often a difficult one that raises many issues in the absence of clear legislation.
Moreover a possible audit process can be influenced by the weight of these elements
within the organization, and they seriously putting its mark on economic activity.
Because we are in an era of development in all areas considered to be appropriate to
pay particular attention to these elements through the implications they have.
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[2]. Same one.
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