What level of assurance do the auditors aim to obtain regarding Chesters' financial statements?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. Misstatements, including omissions, 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.
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the auditors aim to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error. Their objective is to issue an auditor's report that includes their opinion on the financial statements.
Reasonable assurance, as stated in the FDD, is considered a high level of assurance. However, it is not absolute assurance. This means that while the auditors strive to provide a high degree of confidence in the accuracy of the financial statements, there is no guarantee that an audit conducted according to generally accepted auditing standards will always detect every material misstatement.
The FDD also notes that the risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error. This is because fraud may involve activities like collusion, forgery, intentional omissions, or the override of internal control, which are designed to conceal the misstatement. For a prospective Chesters franchisee, this means that while the financial statements have been audited, there is still a risk of undetected misstatements, especially those resulting from fraudulent activities. Therefore, it is important to carefully review the financial statements and consider seeking independent financial advice.
Misstatements, including omissions, 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 materiality threshold is a key consideration for auditors as they plan and execute their audit procedures, focusing on areas where misstatements could have a significant impact on the users of the financial statements.