What constitutes a 'misrepresentation' in connection with obtaining the Bevaris Alliance agreement?
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.
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
The 2024 Bevaris Alliance Franchise Disclosure Document discusses misrepresentations in the context of auditing the company's financial statements. It indicates that during an audit, the auditor assesses the risk of material misstatement of the financial statements, whether due to fraud or error.
Specifically, the document notes that the risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error. This is because fraud may involve intentional omissions or misrepresentations.
In the context of financial statements, 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. This definition is relevant to the auditor's responsibility to detect and report such misstatements.