What is the auditor's responsibility in identifying and assessing the risks of material misstatement of Better Blend's financial statement?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
cture_14.jpeg)
Board of Managers Better Blend Franchising, LLC Page 2
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statement, 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 statement.
- 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.
- 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 statement.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 43)
What This Means (2024 FDD)
According to the 2024 Better Blend FDD, the auditor's responsibility includes identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. This involves designing and performing audit procedures that are responsive to these identified risks. These procedures include examining evidence related to the amounts and disclosures within the financial statements on a test basis.
The auditor must exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditor should have a questioning mind and critically assess the audit evidence. The auditor also needs to obtain an understanding of Better Blend's internal control relevant to the audit. This understanding is used to design appropriate audit procedures but does not extend to expressing an opinion on the effectiveness of the company's internal control.
Furthermore, the auditor evaluates the appropriateness of the accounting policies used by Better Blend and the reasonableness of significant accounting estimates made by management. They also evaluate the overall presentation of the financial statements to ensure they are fairly presented. Finally, the auditor concludes whether there are conditions or events that raise substantial doubt about Better Blend's ability to continue as a going concern for a reasonable period of time.