What does the auditor of Checkers examine on a test basis?
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's 2025 Franchise Disclosure Document, the auditor examines evidence regarding the amounts and disclosures in the consolidated financial statements on a test basis. This is part of the standard audit procedures performed to assess the risk of material misstatement of the financial statements, whether due to fraud or error. The auditors design and perform audit procedures responsive to those risks.
This means that the auditor does not review every single transaction or piece of data, but rather selects a sample to gain reasonable assurance about the fairness of the financial statements. The selection of which items to test is based on the auditor's professional judgment and assessment of risk. This approach is typical in auditing large companies, as it would be impractical and cost-prohibitive to examine every transaction.
For a prospective Checkers franchisee, this indicates that the financial statements presented in the FDD have been subjected to an independent audit, providing a level of assurance as to their reliability. However, it is important to remember that an audit is not a guarantee of accuracy, and the auditor's opinion is based on the evidence available to them at the time of the audit. Franchisees should still carefully review the financial statements and consult with their own financial advisors to make informed decisions.