In an audit, what determination must be made regarding Amorino's ability to continue as a going concern?
Amorino Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with GAAS, 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 CPUSA 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 CPUSA LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 22 — CONTRACTS (FDD pages 80–81)
What This Means (2025 FDD)
According to Amorino's 2025 Franchise Disclosure Document, during an audit, a determination must be made as to whether there are conditions or events that raise substantial doubt about CPUSA LLC's, a wholly-owned subsidiary of Amorino USA Corp, ability to continue as a going concern for a reasonable period of time. This evaluation is based on the auditor's professional judgment and skepticism, considering all conditions and events in the aggregate.
To make this determination, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. They 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. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
The auditor 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, this understanding is not for the purpose of expressing an opinion on the effectiveness of CPUSA LLC's internal control, and no such opinion is expressed. 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.
This process is crucial for prospective franchisees because it provides an independent assessment of Amorino's financial stability. If the audit raises substantial doubt about Amorino's ability to continue as a going concern, it could indicate potential risks for franchisees, such as the franchisor's inability to provide ongoing support, maintain brand standards, or fulfill its contractual obligations. Therefore, understanding the auditor's role in assessing Amorino's financial health is an important part of the due diligence process for any potential franchisee.