What is the auditor's responsibility in exercising professional judgment and maintaining professional skepticism throughout the audit of Bens Soft Pretzels?
Bens_Soft_Pretzels 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 Ben's Soft Pretzels Franchising Corporation'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 Ben's Soft Pretzels Franchising Corporation's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 FDD, the auditor, in this case Insight Accounting Group, P.C., has specific responsibilities when auditing the financial statements of Ben's Soft Pretzels. These responsibilities are designed to ensure the accuracy and reliability of the financial information presented. The auditor's primary objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. Reasonable assurance implies a high level of confidence but does not guarantee the complete elimination of risk.
Throughout the audit, the auditor must exercise professional judgment and maintain professional skepticism. This means the auditor should make informed decisions based on their training, knowledge, and experience, while also maintaining a questioning mind and critically assessing the evidence presented. The auditor must identify and assess the risks of material misstatement in the financial statements, whether due to fraud or error, and design audit procedures that are responsive to those risks. These procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis.
The auditor is also required to obtain an understanding of internal control relevant to the audit to design appropriate audit procedures. However, the auditor's responsibility does not extend to expressing an opinion on the effectiveness of Ben's Soft Pretzels' internal control. Furthermore, the auditor must evaluate the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements. The auditor must also conclude whether there are conditions or events that raise substantial doubt about Ben's Soft Pretzels' ability to continue as a going concern.
Finally, the auditor is required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit. For a prospective Ben's Soft Pretzels franchisee, this indicates that the financial statements have been subjected to a rigorous review process, enhancing their reliability. However, it is important to recognize that even audited financial statements are not a guarantee of future performance, and franchisees should conduct their own due diligence to assess the financial health and prospects of the franchise.