During the audits, what level of judgment and skepticism should be exercised by professionals regarding Chesters?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted auditing standards, we:
- Exercise professional judgment and maintain professional skepticism throughout the audits.
- 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 audits 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 Chester's International, LLC'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 Chester's International, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, auditors are expected to exercise professional judgment and maintain professional skepticism throughout the audits of the company's financial statements. This means that auditors should have a questioning mind and critically assess the information provided by Chesters's management. They should not assume that the financial statements are free from material misstatement, whether due to fraud or error, and should design audit procedures to address the identified risks.
The auditors' responsibilities include identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. They must obtain an understanding of Chesters's internal control system to design appropriate audit procedures, but not to express an opinion on the effectiveness of the internal control. The auditors also evaluate the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements.
It is important to note that while auditors aim to obtain reasonable assurance that the financial statements are free from material misstatement, this is not an absolute guarantee. There is always a risk that a material misstatement, particularly one resulting from fraud, may not be detected. The auditors' report includes their opinion on whether the financial statements present fairly the financial position of Chesters. This opinion is based on the audit evidence obtained and the auditors' professional judgment.