What is the primary objective of the auditors when auditing Chesters' financial statements?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
ties for the Audit of the Financial Statements**
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.
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, the auditors' primary objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. They also aim to issue an auditor's report that includes their opinion on the financial statements. This assurance is a high level of confidence, but it is not an absolute guarantee that all misstatements will be detected. The auditors' responsibilities include exercising professional judgment, assessing risks of material misstatement, understanding internal controls, evaluating accounting policies, and assessing Chesters's ability to continue as a going concern.
The auditors' responsibilities also include identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, and designing and performing audit procedures responsive to those risks. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditors obtain an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances. However, the auditors do not express an opinion on the effectiveness of Chesters's internal control.
For a prospective Chesters franchisee, this means that the financial statements presented in the FDD have been examined by independent auditors who have provided their professional opinion on the fairness and accuracy of the statements. This can provide a level of comfort regarding the financial health and stability of the franchisor. However, it is important to remember that an audit is not a guarantee against all errors or fraud, and prospective franchisees should still conduct their own due diligence and consult with financial advisors before making any investment decisions. The auditors also communicate with those charged with governance regarding the planned scope and timing of the audits, significant audit findings, and certain internal control related matters that were identified during the audits.