When auditing a Bigfoot Forestry financial statement, what must be identified and assessed?
Bigfoot_Forestry Franchise · 2025 FDDAnswer from 2025 FDD Document
onducted 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 are considered material if there is a substantial likelihood that, individually or in 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\nerror, 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 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.
Source: Item 23 — RECEIPT (FDD pages 42–162)
What This Means (2025 FDD)
According to the 2025 FDD, when performing an audit of Bigfoot Forestry's financial statements, the auditor must identify and assess the risks of material misstatement, whether due to fraud or error. This involves designing and performing audit procedures responsive to those risks, including examining evidence regarding amounts and disclosures in the financial statements on a test basis.
Furthermore, the auditor needs to understand the internal control relevant to the audit in order to design appropriate audit procedures, though this does not extend to expressing an opinion on the effectiveness of Bigfoot Franchising, LLC's internal control. The auditor also evaluates the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, along with the overall presentation of the financial statement.
Finally, the auditor must conclude whether there are conditions or events that raise substantial doubt about Bigfoot Franchising, LLC's ability to continue as a going concern for a reasonable period. The auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.