What is the auditor's responsibility regarding Carvel's ability to continue as a going concern?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
at the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of management for the financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether 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 one year after the date the consolidated financial statements are available to be issued.
Auditor's responsibilities for the audit of the financial statements
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 US GAAS 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 judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with US GAAS, 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.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, the auditor has a responsibility to evaluate conditions or events that could raise substantial doubt about the company's ability to continue as a going concern for a reasonable period of time. This evaluation is performed in the aggregate, meaning the auditor considers all relevant factors together. The auditor's conclusion is a judgment based on their assessment.
To fulfill this responsibility, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. They identify and assess the risks of material misstatement in the financial statements, whether due to fraud or error, and design audit procedures to address those risks. These procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis.
The auditor also obtains an understanding of Carvel's internal control 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. Furthermore, the auditor evaluates the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
In summary, the auditor's role is to provide an independent assessment of whether Carvel's financial statements fairly present its financial position and results of operations, including an evaluation of the company's ability to continue as a going concern. This assessment is based on auditing standards generally accepted in the United States of America (US GAAS) and involves a comprehensive review of the company's financial statements, internal controls, and accounting policies.