During an audit for Amorino, what level of professional judgment should be exercised?
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, when performing an audit in accordance with Generally Accepted Auditing Standards (GAAS), the auditors must exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditors must use their expertise and experience to make informed decisions and critically assess the information presented to them. They must also identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design audit procedures responsive to those risks. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
Furthermore, the auditors must obtain an understanding of internal control relevant to the audit to design appropriate audit procedures. However, the audit does not aim to express an opinion on the effectiveness of CPUSA LLC's internal control, and no such opinion is expressed. The auditors will evaluate the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
Finally, the auditors must conclude whether there are conditions or events that raise substantial doubt about CPUSA LLC's ability to continue as a going concern for a reasonable period. They are also required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit. This ensures transparency and accountability in the audit process.