What judgment should an auditor exercise throughout the audit of Benjamin Franklin Plumbing?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with US GAAS, we:
- x Exercise professional judgment and maintain professional skepticism throughout the audit.
- x 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.
- x 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.
- x 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 consolidated financial statements.
- x Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to the 2025 FDD, auditors performing an audit for Benjamin Franklin Plumbing must exercise professional judgment and maintain professional skepticism throughout the audit. This involves a critical and questioning mindset when evaluating the financial statements and related evidence.
The auditors' responsibilities include identifying and assessing the risks of material misstatement in the consolidated financial statements, whether due to fraud or error. They must design and perform audit procedures that are responsive to these identified risks, which includes examining evidence on a test basis regarding the amounts and disclosures in the financial statements.
Furthermore, the auditors need to understand the internal controls relevant to the audit to design appropriate audit procedures, though they do not express an opinion on the effectiveness of the company's internal control. They also evaluate the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the consolidated financial statements.
Finally, the auditors must conclude whether there are conditions or events that, considered in the aggregate, raise substantial doubt about the company's ability to continue as a going concern. This comprehensive approach ensures that the audit provides a reasonable level of assurance that the financial statements are free from material misstatement.