What level of assurance do auditors provide regarding the accuracy of Buona's financial statements?
Buona 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 auditors' 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 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, including omissions, 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.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the auditors aim to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. This objective is to then issue an auditor's report that includes their opinion on the financial statements. The FDD clarifies that reasonable assurance is considered a high level of assurance.
However, the FDD emphasizes that reasonable assurance is not absolute assurance. Therefore, it does not guarantee that an audit conducted according to generally accepted auditing standards will always detect every material misstatement. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error because fraud may involve more complex concealment methods.
In practical terms, this means that while Buona's financial statements have been audited, there is still a risk that some misstatements, especially those resulting from fraud, may not have been detected by the auditors. Prospective franchisees should understand this inherent limitation of financial audits and consider it alongside other due diligence measures when evaluating the franchise opportunity.