During the audit, what level of judgment and skepticism is expected to be exercised by professionals regarding Beggars Pizza's financial statements?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted auditing standards, 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 Beggars 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 Beggars 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 the 2025 Beggars Pizza Franchise Disclosure Document, auditors are expected to exercise professional judgment and maintain professional skepticism throughout the audit of the company's financial statements. This means the auditors must approach the audit with a questioning mind and critically assess the evidence presented by management. They should not automatically assume that the financial statements are free from error or fraud, but instead, they should carefully evaluate the information and consider the possibility of misstatements.
The auditors' responsibilities include identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. To address these risks, they design and perform audit procedures, such as examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditors also obtain an understanding of Beggars Pizza's internal control system to design appropriate audit procedures, although they do not express an opinion on the effectiveness of the company's internal controls.
Furthermore, the auditors evaluate the appropriateness of the accounting policies used by Beggars Pizza and the reasonableness of significant accounting estimates made by management. They also assess the overall presentation of the financial statements to ensure they are fairly presented. Finally, the auditors must determine if there are any conditions or events that, when considered together, raise substantial doubt about Beggars Pizza's ability to continue as a going concern. These responsibilities ensure that the audit is conducted with due diligence and that the financial statements provide a fair and accurate representation of the company's financial position.