What is the auditor's responsibility regarding the evaluation of accounting estimates made by management for Checkersrallys?
Checkersrallys 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 Checkersrallys's 2025 Franchise Disclosure Document, the auditor has specific responsibilities concerning the evaluation of accounting estimates made by the company's management. As part of an audit conducted in accordance with generally accepted auditing standards (GAAS), the auditor must evaluate the reasonableness of significant accounting estimates made by management. This involves assessing whether these estimates are justifiable and appropriate within the context of the financial statements.
To fulfill this responsibility, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit process. This includes identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. The auditor designs and performs audit procedures that are responsive to these identified risks, which may involve examining evidence related to the amounts and disclosures in the financial statements on a test basis.
The auditor also needs to obtain an understanding of Checkersrallys's internal control relevant to the audit. This understanding is crucial for designing audit procedures that are appropriate for the specific circumstances, although the audit does not aim to express an opinion on the effectiveness of the company's internal control. Furthermore, the auditor evaluates the appropriateness of the accounting policies used by management and the overall presentation of the financial statements to ensure they comply with accounting standards.
In summary, the auditor's role is to provide an independent assessment of the financial statements, ensuring that they are presented fairly and in accordance with accounting principles. This includes scrutinizing the accounting estimates made by Checkersrallys's management to ensure they are reasonable and supported by evidence, thus providing a level of assurance to potential investors and franchisees.