What is the auditor's objective in auditing Canine Dimensions' financial statements?
Canine_Dimensions Franchise · 2025 FDDAnswer from 2025 FDD Document
My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to error or fraud, and to issue an auditor's report that includes my opinion. Reasonable assurance
is a high level of assurance but 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 controls. Misstatements are considered material if there is substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, I:
- Exercise professional judgment and maintain professional skepticism throughout the audit
- Identify and assess the risks of material misstatements 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 CANINE DIMENSIONS FRANCHISING LLC 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 my judgment, there are no conditions or events, considered in the aggregate, that raise substantial doubt about CANINE DIMENSIONS FRANCHISING LLC LLC ability to continue as a going concern for a reasonable period of time.
I am 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 I identified during the audit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2025 FDD)
According to Canine Dimensions' 2025 Franchise Disclosure Document, the auditor's primary objective is to provide reasonable assurance that the financial statements are free from material misstatement, whether due to error or fraud. The auditor also aims to issue a report that includes their professional opinion on the financial statements. This assurance is a high level of confidence, but it is not an absolute guarantee that all misstatements will be detected. The auditor notes that 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 controls.
To achieve this objective, the auditor follows generally accepted auditing standards. This involves exercising professional judgment and maintaining skepticism throughout the audit. The auditor identifies and assesses the risks of material misstatements, designs and performs audit procedures responsive to those risks, and examines evidence regarding the amounts and disclosures in the financial statements on a test basis. They also obtain an understanding of Canine Dimensions' internal control system to design appropriate audit procedures, though they do not express an opinion on the effectiveness of the internal control itself.
The auditor evaluates the appropriateness of the accounting policies used by Canine Dimensions and the reasonableness of significant accounting estimates made by management. They also assess the overall presentation of the financial statements. Furthermore, the auditor concludes whether there are conditions or events that raise substantial doubt about Canine Dimensions' ability to continue as a going concern for a reasonable period of time. Finally, the auditor is required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.
For a prospective Canine Dimensions franchisee, this means that the financial statements included in the FDD have been examined by an independent professional who has provided an opinion on their fairness and reliability. While the audit provides a level of comfort, it is important to remember that it is not a guarantee of absolute accuracy. Franchisees should still carefully review the financial statements and consider seeking their own professional advice.