What ethical requirements must the auditors meet in relation to their audits of Beauty Bungalows?

According to Beauty Bungalows' 2025 Franchise Disclosure Document, the auditors who audit Beauty Bungalows' financial statements must adhere to specific ethical requirements. The auditors are required to be independent of Beauty Bungalows and fulfill other ethical responsibilities in accordance with the relevant ethical requirements pertaining to their audits. This requirement ensures that the auditors maintain objectivity and impartiality when conducting their audit.

Specifically, the audit must be conducted in accordance with auditing standards generally accepted in the United States of America (GAAS). These standards outline the responsibilities of the auditors, including exercising professional judgment and maintaining professional skepticism throughout the audit. The auditors must 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.

Furthermore, the auditors are responsible for obtaining an understanding of internal control relevant to the audit to design appropriate audit procedures. However, they do not express an opinion on the effectiveness of Beauty Bungalows' internal control. The auditors also evaluate the appropriateness of accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements. Finally, the auditors must communicate with those charged with governance regarding the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters identified during the audits.