What is the auditor required to evaluate regarding accounting policies used by Aw?
Aw 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 Rayyan Pizza Franchise 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the auditor is required to evaluate the appropriateness of the accounting policies used by management. Additionally, the auditor must assess the reasonableness of significant accounting estimates made by management and evaluate the overall presentation of the financial statements. This evaluation is part of the auditor's broader responsibility to provide reasonable assurance that the financial statements are free from material misstatement.
This requirement ensures that Aw's financial statements are prepared using suitable accounting methods and that the estimates used are justifiable. It also aims to confirm that the financial statements are presented in a way that accurately reflects the company's financial position and performance. The auditor's assessment provides an independent opinion on the fairness and reliability of the financial information presented.
For a prospective Aw franchisee, this means that the financial statements included in the FDD have been scrutinized by an independent auditor. The franchisee can have more confidence that the accounting practices are appropriate and that the financial information is reasonably presented. This is crucial for making informed investment decisions and understanding the financial health of the franchise system.
However, it is important to note that the auditor's assurance is not absolute. There is always a risk that material misstatements, especially those resulting from fraud, may not be detected. Therefore, while the audit provides a level of comfort, franchisees should still conduct their own due diligence and seek professional advice when evaluating the franchise opportunity.