What must the auditor conclude regarding Boulder Designs' ability to continue as a going concern?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
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Other Matter
The financial statements of the Company for the years ended December 31, 2023 and 2022 were audited by another auditor who expressed an unmodified opinion on those statements on March 15, 2024.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether 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 one year after the date that the financial statements are issued.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS 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 the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
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.
Source: Item 23 — RECEIPT (FDD pages 50–217)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, the auditor must conclude whether there are conditions or events that raise substantial doubt about Boulder Designs' ability to continue as a going concern for one year after the financial statements are issued. The auditor's responsibilities include exercising professional judgment, assessing risks of material misstatement, and evaluating the appropriateness of accounting policies. The auditor's report includes their opinion on whether the financial statements present fairly the financial position of Boulder Designs.
Management is responsible for evaluating whether there are conditions that raise substantial doubt about Boulder Designs' ability to continue as a going concern for one year after the financial statements are issued. The management of Boulder Designs believes that their efforts to efficiently manage the business, increase liquidity, and implement cost reduction plans provide them with the ability to continue as a going concern.
However, the notes to the financial statements indicate that as of December 31, 2024 and 2023, Boulder Designs was in a member's deficit position, and current liabilities exceeded current assets by $951,771 and $824,556, respectively. This situation could pose a risk to the company's ability to continue operations without significant changes.
Prospective franchisees should carefully review the full audited financial statements and notes, paying close attention to the auditor's opinion and any disclosures regarding going concern uncertainties. It would be prudent to discuss these financial results with the franchisor and a financial advisor to fully understand the potential risks and implications for the franchise system.