When evaluating Best Brains' financial statements, what must be evaluated regarding accounting policies and estimates?
Best_Brains 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 Best Brains Inc'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 Best Brains Inc's ability to continue as a going concern for a reasonable period of time
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 42)
What This Means (2025 FDD)
According to Best Brains' 2025 Franchise Disclosure Document, when evaluating the financial statements, it's important to assess the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by the management of Best Brains. This evaluation is part of an audit conducted in accordance with generally accepted auditing standards.
Management is responsible for preparing and fairly presenting the financial statements in accordance with accounting principles generally accepted in the United States of America. This includes designing, implementing, and maintaining internal controls relevant to preparing financial statements that are free from material misstatement, whether due to fraud or error. Management must also evaluate whether there are conditions or events that raise substantial doubt about Best Brains' ability to continue as a going concern within one year from when the financial statements are available.
The auditor's responsibility 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. Auditors exercise professional judgment, maintain professional skepticism, identify and assess risks of material misstatement, and obtain an understanding of internal control relevant to the audit. They also evaluate the overall presentation of the financial statements and communicate with those charged with governance regarding the audit's scope, timing, significant findings, and internal control-related matters.