What level of assurance do auditors aim to obtain regarding Alloy's financial statements?
Alloy 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 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.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the auditors aim to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error. The auditors issue a report that includes their opinion on the financial statements.
Reasonable assurance, as stated in the FDD, is considered a high level of assurance. However, it is not absolute assurance and does not guarantee that an audit will always detect a material misstatement. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error because fraud may involve intentional concealment.
Misstatements are considered material if they would likely influence the judgment of a reasonable user of the financial statements. The auditors' responsibilities include exercising professional judgment, assessing the risks of material misstatement, understanding internal control, evaluating accounting policies, and concluding whether there is substantial doubt about Alloy's ability to continue as a going concern.