What is the auditor's responsibility regarding significant accounting estimates made by management of 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.
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 a responsibility to evaluate the reasonableness of significant accounting estimates made by the management of Rayyan Pizza Franchise LLC. This evaluation is part of the broader audit process, which aims to provide reasonable assurance that the financial statements are free from material misstatement. The auditor's objective is to issue a report that includes their opinion on the financial statements.
In performing the audit, the auditor must exercise professional judgment and maintain professional skepticism. They identify and assess the risks of material misstatement, whether due to fraud or error, and design audit procedures to respond to those risks. These procedures include 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 concludes whether there are conditions or events that raise substantial doubt about Aw's ability to continue as a going concern.
This process is crucial for prospective franchisees as it provides an independent assessment of the financial health and reporting practices of Aw. By evaluating the reasonableness of management's accounting estimates, the auditor helps ensure that the financial statements provide a fair and reliable view of Aw's financial position and performance. This information can assist potential franchisees in making informed decisions about investing in an Aw franchise.