What does an audit also include, besides assessing risks, when evaluating All County's financial statements?
All_County Franchise · 2025 FDDAnswer from 2025 FDD Document
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial stDtePents 7Ke proFedures seOeFted depend on tKe Duditor's MudJPent inFOudinJ tKe DssessPent oI risNs oI PDteriDO misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internDO FontroO reOeYDnt to tKe entit's prepDrDtion Dnd IDir presentDtion oI tKe IinDnFiDO stDtePents in order to desiJn Dudit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entit's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to All County's 2025 Franchise Disclosure Document, an audit involves more than just assessing risks of material misstatement in financial statements. It also includes evaluating the appropriateness of the accounting policies All County uses.
Additionally, the audit assesses the reasonableness of significant accounting estimates made by All County's management. This means the auditor scrutinizes the judgments and assumptions made by the company's leadership in preparing the financial statements.
Finally, the audit includes an evaluation of the overall presentation of the financial statements. This ensures that the statements are clear, consistent, and comply with generally accepted accounting principles. The auditor's objective is to provide an opinion on whether the financial statements present fairly the company's financial position, results of operations, and cash flows.