During the audit of Bumble Roofing's consolidated financial statements, what level of professional judgment and skepticism is expected?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
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 consolidated 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 consolidated 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 consolidated 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2025 FDD)
According to Bumble Roofing's 2025 Franchise Disclosure Document, the auditors are expected to exercise professional judgment and maintain professional skepticism throughout the audit of the consolidated financial statements. This means the auditors must use their expertise and critical assessment skills to evaluate the information provided by the company. They should not assume that the information is necessarily correct but should instead seek to verify it through appropriate audit procedures. This approach is essential for ensuring the financial statements are free from material misstatement, whether due to fraud or error.
The auditors' responsibilities include identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. They design and perform audit procedures responsive to those risks, which involve examining evidence regarding the amounts and disclosures in the consolidated financial statements on a test basis. The auditors also obtain an understanding of internal control relevant to the audit to design appropriate audit procedures, though they do not express an opinion on the effectiveness of the company's internal control.
Furthermore, the auditors evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the consolidated financial statements. They also conclude whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern. These procedures are designed to provide reasonable assurance that the financial statements present fairly the financial position of Bumble Roofing.
It is important to note that while the auditors aim to provide reasonable assurance, this is not an absolute guarantee. There is always a risk that a material misstatement may not be detected, especially if it results from fraud involving collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. The auditors are also required to communicate with those charged with governance regarding the scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.