23 Narrative statements
Management’s narrative statements comprise information included in the annual
report, outside the financial statements, on matters such as the company’s strategy,
risks, activities and performance for the year.
24 Primary statements
See financial statements above.
25 Reasonable assurance
In the context of an audit of financial statements, a high, but not absolute, level
of assurance.
26 Regulatory bodies
These are bodies which, among other things, have responsibility in relation to the
qualification and supervision of auditors. Other bodies have responsibility for:
Accounting and financial reporting standard setting: for example, the International
Accounting Standards Board (IASB).
Auditing standard setting: for example, the International Auditing and Assurance
Standards Board (IAASB).
27 Substantive audit evidence
Audit evidence obtained through substantive audit testing procedures, including for
example:
Physical observation or inspection of assets (such as inventory or property, plant
and equipment);
Examination of records to support balances and transactions;
Obtaining confirmations from third parties (for example the banks it uses);
Checking elements of the financial statements by comparison to relevant external
third party information; and
Checking calculations.
28 True and fair
‘True and fair’ is a concept in relation to a set of financial statements that has no precise
definition. It takes into account the inherent judgements required in preparing (and
auditing) financial statements. Financial statements will not be ‘true and fair’ unless the
information they contain is sufficient in terms of both quality and quantity to satisfy the
reasonable expectations of users of the financial statements.
29 Working capital
A financial metric that measures the resources available to a company to finance its dayto-
day operations. It is typically calculated by deducting current liabilities from
current assets.