What is the auditor's role in designing audit procedures for Bombs Away?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the auditor's role in designing audit procedures involves several key steps. The auditor must identify and assess the risks of material misstatement in the financial statements, whether due to fraud or error. Based on this risk assessment, the auditor designs and performs audit procedures that are responsive to those specific risks. These procedures include examining evidence related to the amounts and disclosures within the financial statements, often conducted on a test basis.
Furthermore, the auditor needs to understand Bombs Away's internal control mechanisms relevant to the audit. This understanding is crucial for designing audit procedures that are appropriate for the given circumstances. However, it's important to note that the auditor's objective is not to express an opinion on the effectiveness of Bombs Away's internal control systems. Consequently, the auditor's report will not include such an opinion.
In addition to risk assessment and internal control considerations, the auditor evaluates the appropriateness of the accounting policies used by Bombs Away and the reasonableness of significant accounting estimates made by its management. The auditor also assesses the overall presentation of the financial statements to ensure they are fairly presented. Ultimately, the auditor concludes whether there are conditions or events that raise substantial doubt about Bombs Away's ability to continue as a going concern.
Finally, the auditor is required to communicate with those charged with governance within Bombs Away regarding the planned scope and timing of the audit, any significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures transparency and provides valuable insights to the company's leadership.