What is the auditor's objective in auditing Browns Chicken's financial statements?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
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 guarantee that an audit conducted 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 the aggregate, they would influence the judgement made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted accounting 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 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 Brown's Chicken, LLC'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 Brown's Chicken, LLC'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 42)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the auditor's primary objective is to gain reasonable assurance that the financial statements are free from material misstatements, whether due to fraud or error. This includes issuing an auditor's report that expresses an opinion on the fairness and accuracy of the financial statements. The auditor's report covers the consolidated balance sheets, statements of operations, changes in member's equity, and cash flows.
To achieve this objective, the auditor conducts the audit in accordance with generally accepted auditing standards in the United States. This involves exercising professional judgment, maintaining professional skepticism, assessing the risks of material misstatement, and performing audit procedures to respond to those risks. The auditor examines evidence related to the amounts and disclosures in the financial statements on a test basis.
The auditor also obtains an understanding of Browns Chicken's internal control system to design appropriate audit procedures, but does not express an opinion on the effectiveness of the internal controls. They evaluate 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 also assesses whether there are conditions or events that raise substantial doubt about Browns Chicken's ability to continue as a going concern.
It is important to note that while the auditor aims to provide reasonable assurance, this is not an absolute guarantee that all material misstatements will be detected. The risk of not detecting a material misstatement resulting from fraud is higher than that of error, as fraud may involve collusion, forgery, or intentional omissions. The auditor is required to communicate with those charged with governance regarding the scope and timing of the audit, significant findings, and internal control matters identified during the audit.