What does the auditor of Checkers evaluate regarding accounting estimates made by management?
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 auditor evaluates the reasonableness of significant accounting estimates made by the management of Checkers. This evaluation is part of a broader audit performed in accordance with auditing standards generally accepted in the United States of America (US GAAS). The auditor's objective is to obtain reasonable assurance that the consolidated financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion.
In practical terms, this means the auditor reviews the estimates Checkers' management uses to prepare its financial statements. These estimates can include things like the value of assets, liabilities, and contingent assets, as well as revenue and expenses. Management is required to make these estimates and assumptions in conformity with U.S. GAAP. The auditor assesses whether these estimates are reasonable and based on appropriate accounting policies.
For a prospective Checkers franchisee, this indicates that an independent and qualified auditor has reviewed the financial statements of the company and has considered the reasonableness of the estimates made by management. This process provides a level of assurance that the financial statements are fairly presented. It is important to note that while the auditor provides an opinion on the financial statements, they do not guarantee the accuracy of every figure, as audits involve examining evidence on a test basis and are subject to the risk of not detecting material misstatements.