What is the objective of the audit performed on All Team's financial statements?
All_Team 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 generally accepted auditing standards 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, including omissions, 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 judgement 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 procedure responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of All Team Franchise Corporation's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgement, there are conditions or events, considered in the aggregate, that raise substantial doubt about All Team Franchise Corporation's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 33)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, the objective of the audit is to provide reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The audit also aims to issue an auditor's report that includes an opinion on the financial statements. This means the auditors are trying to determine if the financial statements fairly present All Team's financial position, results of operations, and cash flows in accordance with generally accepted accounting principles.
However, the FDD clarifies that reasonable assurance is not absolute. There is no guarantee that the audit will detect every material misstatement. The risk of not detecting a misstatement resulting from fraud is higher than that of an error because fraud may involve intentional concealment. A misstatement is considered material if it is likely to influence the judgment of a reasonable user of the financial statements.
To achieve these objectives, the auditors will exercise professional judgment and skepticism, assess the risks of material misstatement, examine evidence on a test basis, and evaluate the appropriateness of All Team's accounting policies and estimates. They will also obtain an understanding of All Team's internal control relevant to the audit, though not for the purpose of expressing an opinion on its effectiveness. Finally, the auditors will conclude whether there are conditions or events that raise substantial doubt about All Team's ability to continue as a going concern.
For a prospective franchisee, this information is important because it provides insight into the level of scrutiny All Team's financial statements undergo. While the audit aims to provide assurance, it is not a guarantee of complete accuracy. Franchisees should carefully review the financial statements and consider the auditor's opinion, but also understand the limitations of the audit process.