What is the auditor's responsibility concerning Churchs Chicken's ability to continue as a going concern?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
- 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.
- Conclude whether, in our judgment, 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 a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 35–43)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the auditor, Ernst & Young LLP, has specific responsibilities related to the company's ability to continue as a going concern. As part of their audit, they must conclude whether there are conditions or events that raise substantial doubt about Churchs Chicken's ability to continue operating for a reasonable period of time. This assessment is made by considering all relevant conditions and events in the aggregate.
To fulfill this responsibility, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. They identify and assess the risks of material misstatement in the financial statements, whether due to fraud or error, and design audit procedures to address these risks. These procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditor also evaluates the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
Furthermore, the auditor is required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures that relevant parties are informed of any potential issues that could affect Churchs Chicken's financial stability and ability to continue as a going concern. This process is a standard part of financial auditing, intended to provide stakeholders with confidence in the accuracy and reliability of the financial statements.