In the audit of Bumble Roofing, what is the auditor expected to do with the risks of material misstatement?

According to Bumble Roofing's 2025 Franchise Disclosure Document, the auditor's responsibilities include identifying and assessing the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. They are also expected to design and perform audit procedures responsive to those risks. These procedures involve examining evidence regarding the amounts and disclosures in the consolidated financial statements on a test basis.

In simpler terms, the auditor must evaluate where the financial statements might be wrong due to mistakes or fraud. Then, they must create and carry out auditing steps to address those specific risks. This involves checking the numbers and information in the financial statements to see if they are accurate.

It's important to note that the auditor's responsibility is to obtain reasonable assurance that the financial statements are free from material misstatement. However, this is not an absolute guarantee. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve intentional concealment. This means that while the auditor will do their best to find any issues, there is always a chance that some problems, especially those involving fraud, could go unnoticed.

For a prospective Bumble Roofing franchisee, this indicates that the financial statements have been examined by an independent party who has taken steps to ensure their accuracy. However, it's also a reminder that even audited financial statements are not perfect and should be reviewed with a degree of professional skepticism.