What does the auditor evaluate regarding accounting policies used by Chocolate Fish Coffee?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- 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.
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- 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 financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 41)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, the auditor evaluates the appropriateness of the accounting policies used by the company. This evaluation is part of a broader audit conducted in accordance with generally accepted auditing standards in the United States of America (GAAS). The auditor's objective is to obtain reasonable assurance that the financial statements are free of material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion.
In assessing the appropriateness of Chocolate Fish Coffee's accounting policies, the auditor also evaluates the reasonableness of significant accounting estimates made by management and the overall presentation of the financial statements. This includes examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also gains an understanding of internal controls relevant to the audit to design appropriate audit procedures, though they do not express an opinion on the effectiveness of the company's internal control.
The auditor's evaluation extends to determining whether there are conditions or events that raise substantial doubt about Chocolate Fish Coffee's ability to continue as a going concern for a reasonable period. This comprehensive assessment ensures that the financial statements provide a fair and accurate representation of the company's financial position, results of operations, and cash flows, in accordance with accounting principles generally accepted in the United States of America.