What is the auditor's objective in auditing the financial statements of Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
doubt about the Company's ability to continue as a going concern for one year after the date the consolidated financial statements are 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.
- 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, 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. The auditor also aims to issue a report that includes their opinion on the financial statements. The document clarifies that reasonable assurance is a high level of assurance, but it is not absolute, and therefore, an audit conducted following US GAAS (auditing standards generally accepted in the United States of America) may not always detect a material misstatement. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error because fraud may involve intentional concealment.
The FDD specifies that misstatements are considered material if they would likely influence the judgment of a reasonable user of the financial statements. In conducting the audit, the auditor will exercise professional judgment and maintain professional skepticism. They will identify and assess the risks of material misstatement, design and perform audit procedures responsive to those risks, and examine evidence regarding the amounts and disclosures in the financial statements on a test basis.
Furthermore, the auditor will obtain an understanding of internal control relevant to the audit to design appropriate audit procedures, though they will not express an opinion on the effectiveness of Checkersrallys's internal control. The auditor will evaluate the appropriateness of accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements. Finally, the auditor will conclude whether there are conditions or events that raise substantial doubt about Checkersrallys's ability to continue as a going concern.