What must the auditors conclude regarding Basecamp Fitness's ability to continue as a going concern?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
4, expressed an unmodified opinion on those statements.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date the consolidated financial statements are available to be issued.
Auditors' Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' 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 US 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 there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with US GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the consolidated 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 consolidated 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 the Company's internal control. Accordingly, no such opinion is expressed.
Source: Item 23 — RECEIPTS (FDD pages 62–248)
What This Means (2025 FDD)
According to Basecamp Fitness's 2025 Franchise Disclosure Document, the auditors must conclude whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern for one year after the consolidated financial statements are available to be issued. This evaluation is a standard part of preparing consolidated financial statements.
The auditors' responsibilities include obtaining reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and issuing an auditors' report that includes their opinion. However, reasonable assurance is not absolute, and there's a risk that material misstatements may not always be detected, especially those resulting from fraud.
In conducting the audit, the auditors must exercise professional judgment and maintain professional skepticism. They identify and assess the risks of material misstatement, examine evidence, understand internal controls, evaluate accounting policies and estimates, and assess the overall presentation of the financial statements. This rigorous process aims to provide a reliable basis for their opinion on Basecamp Fitness's financial health and ability to continue operations.