What is the auditor's responsibility regarding professional skepticism during the audit of Aw?

According to Aw's 2025 Franchise Disclosure Document, the auditor has specific responsibilities during the audit of the financial statements. One key responsibility is to exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditor must have a questioning mind and critically assess the evidence presented, rather than simply accepting it at face value. This skepticism is crucial for identifying potential misstatements, whether due to fraud or error. By maintaining professional skepticism, the auditor aims to increase the likelihood of detecting material misstatements in Aw's financial statements.

The auditor's objective is 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 that includes their opinion. However, it's important to note that reasonable assurance is not absolute, and there is no guarantee that an audit conducted according to Generally Accepted Auditing Standards (GAAS) will always detect every material misstatement. 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.

In addition to maintaining professional skepticism, the auditor must identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. They design and perform audit procedures responsive to those risks, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, though they do not express an opinion on the effectiveness of Aw's internal control. Furthermore, the auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements.

Finally, the auditor concludes 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. 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 comprehensive approach ensures that the auditor provides a thorough and reliable assessment of Aw's financial statements.