What is the auditor's responsibility regarding the evaluation of the appropriateness of accounting policies used by 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.
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 a responsibility to evaluate the appropriateness of the accounting policies used by the company. This evaluation is part of a broader audit conducted in accordance with auditing standards generally accepted in the United States of America (US GAAS). The auditor's role includes assessing the reasonableness of significant accounting estimates made by the management team and evaluating the overall presentation of the consolidated financial statements.
In practical terms, this means the auditor must scrutinize the accounting methods Checkersrallys employs to ensure they align with standard accounting principles and provide a fair and accurate representation of the company's financial performance and position. This involves examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditor is expected to exercise professional judgment and maintain professional skepticism throughout the audit to identify any potential misstatements, whether due to fraud or error.
The auditor's evaluation extends to determining whether there are conditions or events that, when considered together, raise substantial doubt about Checkersrallys's ability to continue as a going concern for a reasonable period. Furthermore, the auditor is obligated to communicate with those charged with governance regarding the planned scope and timing of the audit, any significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures transparency and provides stakeholders with insights into the audit process and its outcomes.
For a prospective Checkersrallys franchisee, this signifies that the financial statements presented in the FDD have been subjected to external scrutiny, enhancing their reliability. However, it's important to recognize that an audit provides reasonable assurance, not an absolute guarantee, that the financial statements are free from material misstatement. Franchisees should still carefully review the financial statements and consult with their own financial advisors to make informed decisions.