What is the auditor required to do regarding the risks of material misstatement of Aw's financial statements?
Aw 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 GAAS 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, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these remarks and the information of this website is published in good faith and for general information purpose only. Franchimp.com does not make any warranties about the completeness, reliability, and
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.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Rayyan Pizza Franchise LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the auditor has several responsibilities regarding the risk of material misstatement in the financial statements. The auditor's objectives are to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report including their opinion. While reasonable assurance is a high level of assurance, it is not absolute, and there is no guarantee that an audit will always detect a material misstatement. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error because fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
To meet these objectives, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. They are required to 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 also needs to obtain an understanding of internal control relevant to the audit to design appropriate audit procedures, although they are not expressing an opinion on the effectiveness of Aw's internal control.
Furthermore, the auditor must 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 must conclude whether there are conditions or events that raise substantial doubt about Aw's ability to continue as a going concern for a reasonable period of time. These responsibilities ensure that the auditor takes a comprehensive approach to assessing and addressing the risks of material misstatement in Aw's financial statements.