When evaluating Better Blend's financial statements, what must be evaluated regarding accounting policies and estimates?
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, when reviewing the company's financial statements, it's important to consider the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management. This evaluation is part of the auditor's responsibility to ensure the financial statements are presented fairly and in accordance with generally accepted accounting principles (GAAP). The auditor must exercise professional judgment and maintain professional skepticism throughout the audit to identify any material misstatements, whether due to fraud or error.
Management is responsible for preparing 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 the preparation and fair presentation of 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 Better Blend's ability to continue as a going concern within one year after the date that the financial statement is issued or available to be issued.
Better Blend's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. For example, Better Blend maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its franchisees to make required payments. Management considers the age of royalties receivable balances and general economic issues when determining the collectability of specific accounts.