What is the auditor's responsibility regarding significant accounting estimates made by management of Better Blend?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
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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 Better Blend's 2024 Franchise Disclosure Document, the auditor has a responsibility to evaluate the reasonableness of significant accounting estimates made by the company's management. This evaluation is part of a broader audit performed in accordance with auditing standards generally accepted in the United States of America (GAAS). The auditor's 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.
To fulfill this responsibility, the auditor exercises professional judgment and maintains professional skepticism throughout the audit. They 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. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, although they do not express an opinion on the effectiveness of the company's internal control.
For a prospective Better Blend franchisee, this means that the financial statements presented in the FDD have been scrutinized by an independent auditor who has specifically assessed the reasonableness of the accounting estimates made by Better Blend's management. While this provides a level of assurance, it is not a guarantee that the financial statements are completely free of error. Franchisees should still carefully review the financial statements and consider seeking their own professional financial advice.