During the audit of Checkers' financial statements, what must the auditors conclude regarding the company's ability to continue as a going concern?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
- 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 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the auditors are required to conclude whether there are conditions or events that raise substantial doubt about Checkers' ability to continue as a going concern for a reasonable period of time. This assessment is a critical part of the audit process, ensuring that the financial statements provide a fair and accurate representation of the company's financial health. The auditor's responsibility is to evaluate the appropriateness of accounting policies, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
To form their conclusion, the auditors must exercise professional judgment and maintain professional skepticism throughout the audit. They 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. These procedures include examining evidence regarding the amounts and disclosures in the consolidated financial statements on a test basis. The auditors also obtain an understanding of internal control relevant to the audit to design appropriate audit procedures, although they do not express an opinion on the effectiveness of Checkers' internal control.
The auditor's report will include an opinion on whether the financial statements present fairly, in all material respects, the financial position of Checkers. If the auditors identify conditions or events that raise substantial doubt about Checkers' ability to continue as a going concern, this will be disclosed in the audit report. This information is crucial for prospective franchisees as it provides insight into the financial stability and long-term viability of Checkers. A potential franchisee should carefully review the auditor's report and any related disclosures to assess the risks associated with investing in a Checkers franchise.