What is the auditor's opinion regarding the absolute assurance of detecting material misstatements in Checkersrallys' financial statements?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
evaluate 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 quarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when
it exists.
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 financial statements are free of material misstatement, whether due to fraud or error. However, the auditor's report explicitly states that reasonable assurance is not absolute assurance. Therefore, an audit conducted following generally accepted auditing standards (GAAS) does not guarantee the detection of every material misstatement. This acknowledgment reflects the inherent limitations in the auditing process.
The auditor emphasizes that the risk of not detecting a material misstatement resulting from fraud is higher than that of one resulting from error. This is because fraud may involve sophisticated methods such as collusion, forgery, intentional omissions, misrepresentations, or the overriding of internal controls, which are designed to prevent errors but may be circumvented in cases of fraud.
For a prospective Checkersrallys franchisee, this means that while the financial statements have been audited, there is still a risk of undetected material misstatements. Franchisees should understand that the audit provides a reasonable level of confidence, but not a guarantee, in the accuracy of the financial statements. This highlights the importance of carefully reviewing the financial statements and potentially seeking independent financial advice to fully assess the financial health of Checkersrallys.