When auditing Bft, is it required to evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
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 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 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 statements.
- 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 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to the 2025 FDD, when performing an audit in accordance with Generally Accepted Auditing Standards (GAAS), the auditor is required to evaluate the appropriateness of accounting policies used by Bft's management, as well as the reasonableness of significant accounting estimates made by them. The auditor must also evaluate the overall presentation of the financial statements. This evaluation is part of a broader process that includes exercising professional judgment and maintaining professional skepticism throughout the audit.
This requirement ensures that Bft's financial statements are presented fairly and accurately. By evaluating the accounting policies and estimates, the auditor provides an independent assessment of whether the financial information is reliable and in compliance with accounting standards. This is important for prospective franchisees as it gives them confidence in the financial health and reporting practices of the Bft franchise system.
Furthermore, the auditor is required to 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 evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor must also obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate, although the audit does not express an opinion on the effectiveness of Bft's internal control.