When auditing Alloy, what should the audit procedures include regarding evidence related to amounts and disclosures in the financial statements?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
- 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 Alloy Personal Training, LLC'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 judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Alloy Personal Training, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the audit procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. This means the auditor will not review every single transaction or disclosure, but rather a sample to form an opinion. The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error.
The auditor will 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. They will also obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. However, the audit will not express an opinion on the effectiveness of Alloy's internal control.
Furthermore, the auditor will 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. Finally, the auditor will conclude whether, in their judgment, there are conditions or events that raise substantial doubt about Alloy's ability to continue as a going concern for a reasonable period of time. These procedures are aligned with generally accepted auditing standards.