What does the audit of Benihana include regarding accounting principles?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the audit conducted by the Public Company Accounting Oversight Board (PCAOB) involves evaluating the accounting principles used by the company's management. The audit aims to provide reasonable assurance that the financial statements are free of material misstatement, whether due to error or fraud.
Specifically, the audit procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis. This means the auditors do not review every single transaction but rather select a sample to assess the overall accuracy and reliability of the financial reporting. Additionally, the auditors evaluate significant estimates made by management, which are often subjective and can have a material impact on the financial statements. The auditors also assess the overall presentation of the financial statements to ensure they are clear, consistent, and in compliance with accounting standards.
The audit's ultimate goal is to provide an opinion on whether the financial statements fairly present the company's financial position, results of operations, and cash flows in conformity with generally accepted accounting principles (GAAP). The audit report expresses this opinion and provides assurance to investors, creditors, and other stakeholders that the financial statements can be relied upon. However, the audit does not include an assessment of the company's internal control over financial reporting, and therefore, no opinion is expressed on the effectiveness of those controls.
Furthermore, the audit identifies and communicates any critical audit matters to the audit committee. These matters relate to accounts or disclosures that are material to the financial statements and involve especially challenging, subjective, or complex judgments by the auditors. Communicating these critical audit matters does not change the overall opinion on the financial statements but provides additional transparency and insight into the audit process.