What is the auditor's responsibility in assessing the risks of material misstatement in Bevaris Alliance's financial statements due to error?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
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 has several responsibilities related to assessing the risk of material misstatement in the financial statements, whether due to fraud or error. The auditor must identify and assess these risks and then design and perform audit procedures that are responsive to the identified risks. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
Furthermore, the auditor is required to obtain an understanding of internal control relevant to the audit. This understanding is used to design audit procedures that are appropriate for the circumstances, but it's important to note that the auditor does not express an opinion on the effectiveness of Bevaris Alliance's internal control. The auditor also evaluates the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, and assesses the overall presentation of the financial statements.
In summary, the auditor's role involves exercising professional judgment and maintaining professional skepticism throughout the audit, assessing the risk of material misstatement (whether due to fraud or error), designing appropriate audit procedures, understanding internal controls, and evaluating accounting policies and estimates to form an opinion on the financial statements.