What does the audit of 1 800 Packouts include regarding evidence in the financial statements?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
isstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to the 2025 FDD, the audit conducted for 1 800 Packouts' financial statements involves examining evidence related to the amounts and disclosures within those statements. The auditors' procedures include assessing the risks of material misstatement, whether due to fraud or error, and designing audit procedures responsive to those risks. This involves examining evidence on a test basis.
The audit aims to provide reasonable assurance that the financial statements are free from material misstatement. However, it's important to note that this is not an absolute guarantee. The auditors also obtain an understanding of internal control relevant to the audit to design appropriate procedures, though they do not express an opinion on the effectiveness of the company's internal control.
Furthermore, the audit includes evaluating the appropriateness of accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements. The auditors also conclude on whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern. These factors are crucial for prospective franchisees to consider, as they reflect the financial health and stability of 1 800 Packouts.