How are misstatements considered material in the context of the Checkersrallys financial audit?
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 the 2025 Checkersrallys FDD, 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 financial statements. This definition is used by the independent auditor when assessing the fairness and accuracy of Checkersrallys's consolidated financial statements. The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error.
For a prospective Checkersrallys franchisee, this means that the financial statements presented in the FDD should provide a reliable basis for making investment decisions. The audit aims to ensure that no single error or accumulation of errors would mislead a reasonable person reviewing the financials. This is particularly important when evaluating the financial health and stability of Checkersrallys as a franchise system.
It's important to note that while the audit provides a high level of assurance, it is not an absolute guarantee against misstatements. The risk of not detecting a material misstatement is higher when it results from fraud, which may involve intentional concealment or manipulation of financial data. Therefore, while the audit process adds credibility to the financial statements, prospective franchisees should still conduct their own due diligence and seek professional advice when evaluating the financial aspects of investing in a Checkersrallys franchise.