What is the auditor's responsibility regarding the assessment of the risks of material misstatement of the financial statements for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
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 include 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.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the auditor has specific responsibilities in assessing the risk of material misstatement of the financial statements. The auditor's responsibilities include identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, and designing and performing audit procedures responsive to those risks. These procedures involve examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
Furthermore, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditor should have a questioning mind and critically assess the audit evidence. The auditor is also required to obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate for the circumstances. However, the auditor does not express an opinion on the effectiveness of Checkersrallys's internal control.
Additionally, the auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements. The auditor also concludes whether there are conditions or events that raise substantial doubt about Checkersrallys's ability to continue as a going concern. Finally, the auditor is required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.
For a prospective Checkersrallys franchisee, this means that the financial statements have been examined by an independent auditor who has followed standard auditing procedures to ensure they are free from material misstatement. This provides a level of assurance that the financial information presented is reliable and fairly represents the financial position of Checkersrallys. However, it is important to note that an audit provides reasonable, but not absolute, assurance, and there is always a risk that a material misstatement may not be detected.