What is the auditor's objective in auditing Checkers' financial statements?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
uate 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 that the 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 financial statements as a whole are free of 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 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 financial statements.
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures\ninclude examining, on a test basis, evidence regarding the amounts and disclosures in the 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 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's objective is to obtain reasonable assurance that the financial statements are free of material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. The auditor's report confirms if the financial statements are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. This assurance helps potential investors and franchisees make informed decisions based on reliable financial information.
However, the FDD clarifies that reasonable assurance is not absolute. There is always a risk that a material misstatement, especially one resulting from fraud, may not be detected. Fraudulent misstatements are more difficult to detect because they may involve collusion, forgery, or intentional omissions. Therefore, while the audit aims to provide a high level of confidence, it does not guarantee complete accuracy.
The auditor's responsibilities include exercising professional judgment, maintaining professional skepticism, identifying and assessing risks of material misstatement, and evaluating the appropriateness of accounting policies. They also obtain an understanding of Checkers' internal controls but do not express an opinion on their effectiveness. The auditor must also conclude whether there are conditions or events that raise substantial doubt about Checkers' ability to continue as a going concern.
In summary, the audit of Checkers' financial statements is intended to provide an independent opinion on the fairness and reliability of the company's financial reporting. This process involves a thorough examination of the financial statements and related controls, but it is subject to inherent limitations and does not eliminate all risks of misstatement. Prospective franchisees should understand the scope and limitations of the audit when reviewing Checkers' financial statements.