What is the auditor's responsibility regarding professional judgment during the audit of Carbones Pizzeria?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
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 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 the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to the 2025 FDD, the auditor's responsibilities during the audit of Carbones Pizzeria's financial statements include exercising professional judgment and maintaining professional skepticism throughout the audit. This means the auditor must use their expertise and experience to make informed decisions and critically assess the information provided by management.
The auditor's role also involves identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. To address these risks, the auditor designs and performs audit procedures, such as examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, providing an opinion on whether the financial statements present fairly the company's financial position and results of operations.
Furthermore, the auditor must gain an understanding of Carbones Pizzeria's internal control system relevant to the audit. This understanding is used to design appropriate audit procedures but does not extend to expressing an opinion on the effectiveness of the company's internal control. The auditor also evaluates the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, ensuring that the overall presentation of the financial statements is fair and accurate.
Finally, the auditor must determine whether there are conditions or events that raise substantial doubt about Carbones Pizzeria's ability to continue as a going concern. The auditor is also required to communicate with those in charge of governance regarding the scope and timing of the audit, significant findings, and any internal control-related issues identified during the audit.