Regarding Bambu's financial statements, what could cause actual results to differ from the estimates made by management?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
LLC's ability to continue as a going concern for one year after the date that the financial statements are issued.
Auditor's Responsibilities for the Audit of the Financial Statements
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 ifthere is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In perfonning 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 perfonn 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 Bambu Franchising, LLC's internal control. Accordingly, no such opinion is expressed.
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, the auditor's report indicates several factors that could cause actual financial results to differ from management's estimates. These include the possibility of material misstatements due to fraud or error. The risk of not detecting a material misstatement resulting from fraud is higher than that of error because fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Furthermore, the auditor's responsibilities include evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. This evaluation inherently involves judgment and skepticism, meaning that the auditor may disagree with management's assumptions or estimates, leading to adjustments in the financial statements. The auditor's role is to obtain reasonable assurance that the financial statements are free from material misstatement, but this assurance is not absolute, implying that some misstatements may go undetected.
For a prospective Bambu franchisee, this means that the financial statements should be viewed with an understanding of the inherent limitations and potential for discrepancies. While the auditor provides an opinion on the fair presentation of the financials, it is not a guarantee of complete accuracy. Franchisees should consider these factors when making investment decisions and may want to seek independent financial advice to assess the risks and uncertainties associated with the franchise.