When are misstatements considered material in 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
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, misstatements are considered material if they, individually or in the aggregate, could reasonably be expected to influence the economic decisions of users made on the basis of the financial statements. This definition is used by the independent auditor when evaluating the accuracy and reliability of 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.
For a prospective Aw franchisee, this means that the financial information presented in the FDD should be sufficiently accurate and reliable for them to make informed investment decisions. The auditor's assessment of materiality ensures that any significant errors or omissions that could impact a franchisee's understanding of Aw's financial performance are identified and addressed.
It is important to note that reasonable assurance is not absolute, and there is always a risk that a material misstatement may not be detected. The risk is higher for misstatements resulting from fraud, which may involve intentional concealment or misrepresentation. However, the auditor is required to exercise professional judgment and maintain professional skepticism throughout the audit to minimize this risk.
In summary, the materiality standard ensures that Aw's financial statements provide a fair and reliable basis for prospective franchisees to evaluate the financial health and performance of the franchise system. Franchisees should carefully review the financial statements and consult with their own financial advisors to assess the potential risks and rewards of investing in an Aw franchise.