What is the auditor's responsibility in evaluating the reasonableness of significant accounting estimates made by Bombs Away's management?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the auditor has a responsibility to evaluate the reasonableness of significant accounting estimates made by the company's management. This evaluation is part of a broader audit conducted in accordance with auditing standards generally accepted in the United States of America. The auditor's role is to obtain reasonable assurance that the financial statements are free from material misstatement.
To fulfill this responsibility, the auditor performs procedures to gather audit evidence concerning the amounts and disclosures in the financial statements. These procedures are chosen based on the auditor's judgment, which includes assessing the risks of material misstatement due to fraud or error. As part of the risk assessment, the auditor considers Bombs Away's internal control relevant to the preparation and fair presentation of the financial statements to design appropriate audit procedures. However, the audit does not aim to express an opinion on the effectiveness of Bombs Away's internal control.
The audit also involves evaluating the appropriateness of the accounting policies Bombs Away used. The auditor's overall objective is to form an opinion on whether the financial statements present fairly the company's financial position and results of operations in accordance with accounting principles generally accepted in the United States of America. The auditor issues a report expressing their opinion on the financial statements based on the audit evidence obtained.