What is the auditor's responsibility in evaluating the reasonableness of significant accounting estimates made by Bevaris Alliance's management?
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 specific responsibilities when evaluating the financial statements. As part of an audit conducted under generally accepted auditing standards, the auditor must evaluate the reasonableness of significant accounting estimates made by the management of Bevaris Alliance. This involves assessing whether the estimates used by management are justifiable and appropriate based on the available evidence and accounting principles. The auditor also evaluates the appropriateness of the accounting policies used and the overall presentation of the financial statements.
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, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
It is important to note that while the auditor obtains an understanding of internal control relevant to the audit, this is done to design appropriate audit procedures and not to express an opinion on the effectiveness of Bevaris Alliance's internal control. Therefore, the auditor's report does not include an opinion on the company's internal controls. The auditor's overall objective is to obtain reasonable assurance that the financial statements are free from material misstatement and to issue an auditor's report that includes their opinion on whether the financial statements present fairly the financial position of Bevaris Alliance.