What is the auditor's objective regarding Carbones Pizzeria's consolidated financial statements?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgement made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with generally accepted auditing standards, 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
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. The auditor then issues a report that includes their opinion on the financial statements. The auditor's assurance is considered a high level of assurance, but it is not absolute. Therefore, it does not guarantee that all material misstatements will be detected. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error because fraud may involve activities like collusion or forgery.
For a prospective Carbones Pizzeria franchisee, this means that the financial statements have been examined by an independent party to provide an opinion on their fairness and accuracy. This audit aims to give potential investors and franchisees confidence in the financial information presented. However, it is important to recognize that even with an audit, there is still a risk of undetected misstatements, especially those resulting from fraudulent activities.
The auditor's responsibilities include exercising professional judgment, maintaining professional skepticism, identifying and assessing risks of material misstatement, and obtaining an understanding of internal control relevant to the audit. These steps are taken to design audit procedures that are appropriate for the circumstances, but the auditor does not express an opinion on the effectiveness of the company's internal control. The auditor evaluates whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.
Material misstatements are those that could influence the judgment of a reasonable user of the financial statements. The audit involves examining evidence regarding the amounts and disclosures in the consolidated financial statements on a test basis. This process helps to ensure that the financial statements provide a fair and reliable view of Carbones Pizzeria's financial position and performance.