What is the auditor's objective in auditing the financial statements of All Dogs Unleashed?
All_Dogs_Unleashed Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud 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, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these financial statements.
Source: Item 23 — RECEIPTS (FDD pages 49–158)
What This Means (2025 FDD)
According to the 2025 FDD, the auditor's objective is to obtain reasonable assurance that the financial statements of All Dogs Unleashed are free from material misstatement, whether due to fraud or error. The auditor will then issue a report that includes their opinion on the financial statements.
Reasonable assurance, while a high level of assurance, is not absolute. Therefore, an audit conducted following Generally Accepted Auditing Standards (GAAS) does not guarantee the detection of every material misstatement. The risk of failing to detect a material misstatement is higher when it results from fraud, as fraud may involve intentional concealment or misrepresentation.
Misstatements are considered material if they could reasonably influence the economic decisions of users relying on the financial statements. In conducting the audit, the auditor will exercise professional judgment, maintain skepticism, assess the risk of material misstatement, examine evidence on a test basis, and evaluate the appropriateness of accounting policies and estimates. The auditor also considers conditions or events that could raise doubt about All Dogs Unleashed's ability to continue as a going concern.