During an audit, what level of judgment and skepticism is Best Western required to exercise?
Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
then ended, and the related notes (collectively referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company at November 30, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits.
Source: Item 23 — Receipts (FDD pages 108–413)
What This Means (2025 FDD)
According to the 2025 Best Western Franchise Disclosure Document, the company's financial statements are audited by Ernst & Young LLP. The audit is conducted in accordance with auditing standards generally accepted in the United States of America (GAAS). These standards dictate the responsibilities of the auditors.
The auditors are required to be independent of Best Western and must meet ethical requirements relevant to the audit. The auditors must obtain sufficient and appropriate audit evidence to provide a basis for their opinion. This suggests a standard of due diligence and professional skepticism is expected during the audit process.
The audit aims to ensure that the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Best Western in accordance with accounting principles generally accepted in the United States of America. This implies that the auditors must exercise judgment to determine what is "material" and whether the financial statements are fairly presented. The audit report expresses the auditor's opinion on whether the financial statements are fairly presented.