What is the basis for examining evidence in Bombs Away's financial statements during an audit?
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 audit of the company's financial statements involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The selection of these procedures is based on the auditor's judgment, which includes assessing the risks of material misstatement in the financial statements, whether due to fraud or error.
During the risk assessment, the auditor considers internal controls relevant to Bombs Away's preparation and fair presentation of the financial statements. This consideration helps in designing audit procedures that are appropriate for the circumstances, but it does not extend to expressing an opinion on the effectiveness of the entity's internal control. The audit also includes evaluating the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. It's important to note that while reasonable assurance is a high level of assurance, it is not absolute, and there is a risk that a material misstatement may not be detected, especially if it results from fraud involving collusion, forgery, or intentional omissions.