What is the auditor required to evaluate regarding accounting policies used by Burros Fries?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 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 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 Burros & Fries Franchise, Inc.'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 Burros & Fries Franchise, Inc.'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 (2024 FDD)
According to Burros Fries's 2024 Franchise Disclosure Document, the auditor is required to evaluate the appropriateness of the accounting policies used by the company. This evaluation is part of a broader audit performed in accordance with generally accepted auditing standards (GAAS). The auditor must also assess the reasonableness of significant accounting estimates made by management and evaluate the overall presentation of the financial statements.
This requirement ensures that Burros Fries's financial statements are presented fairly and in accordance with generally accepted accounting principles. By evaluating the appropriateness of accounting policies, the auditor provides an independent opinion on whether the policies selected and applied by the company are suitable for its business and industry. This helps to ensure consistency and comparability of financial information.
For a prospective Burros Fries franchisee, this means that the financial statements included in the FDD have been subjected to an independent review of the accounting policies. While the audit does not guarantee the complete absence of errors or misstatements, it provides a reasonable level of assurance that the financial information is reliable and fairly presented. Franchisees can use this information to make informed decisions about their investment in the franchise.