During an audit for Carbones Pizzeria, what level of judgment should be exercised?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
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 M&T Pizza Incorporated and Subsidiaries ability to continue as a going concern for a reasonable period of time.
We are 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 we identified during the audit.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to the 2025 FDD, during an audit of Carbones Pizzeria, the auditors must evaluate the appropriateness of the accounting policies used by the company, as well as the reasonableness of significant accounting estimates made by management. Auditors also need to evaluate the overall presentation of the consolidated financial statements to ensure they are fairly presented. This involves professional judgment to assess whether the financial information is reliable and in accordance with accounting principles.
Furthermore, the auditors must determine if there are any conditions or events that, when considered together, raise substantial doubt about Carbones Pizzeria's ability to continue as a going concern. This requires a comprehensive review of the company's financial health and future prospects. The auditors are not expressing an opinion on the effectiveness of the company's internal controls.
Finally, the auditors are required to communicate with those charged with governance regarding the planned scope and timing of the audit, any significant findings, and certain internal control-related matters identified during the audit. This communication ensures transparency and provides an opportunity for those in charge to address any concerns raised during the audit process.