What is the auditor's objective when auditing Bevaris Alliance's financial statements?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
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 Bevaris Alliance Franchise System, LLC'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.
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to Bevaris Alliance's 2024 Franchise Disclosure Document, the auditor's primary objective is to gain reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This assurance allows the auditor to issue a report that includes their professional opinion on the financial statements' accuracy and reliability. The auditor's goal is to provide confidence to stakeholders that the financial statements present a fair view of Bevaris Alliance's financial position.
However, the FDD clarifies that reasonable assurance is not absolute. While the audit is conducted according to generally accepted auditing standards, there is no guarantee that all material misstatements will be detected. The risk of not detecting misstatements resulting from fraud is higher than those resulting from error because fraud may involve intentional concealment, such as collusion or forgery.
To achieve their objective, the auditor exercises professional judgment and maintains skepticism throughout the audit. They identify and assess the risks of material misstatement, design and perform audit procedures responsive to those risks, and evaluate the appropriateness of accounting policies used by Bevaris Alliance's management. The auditor also obtains an understanding of internal control relevant to the audit, though not for the purpose of expressing an opinion on the effectiveness of Bevaris Alliance's internal control. Ultimately, the auditor concludes whether there is substantial doubt about Bevaris Alliance's ability to continue as a going concern.