What is the auditor's responsibility in evaluating Cicis' ability to continue as a going concern?
Cicis 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 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the auditor has a specific responsibility regarding the company's ability to continue as a going concern. As part of their audit, the auditor must conclude whether there are conditions or events that, when considered in total, raise substantial doubt about Cicis's ability to continue operating for a reasonable period of time. This assessment is a critical component of the audit process.
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 respond to these risks. These procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditor also gains an understanding of Cicis's internal control system to design appropriate audit procedures, although they do not express an opinion on the effectiveness of the company's internal control.
Furthermore, the auditor evaluates the appropriateness of the accounting policies used by Cicis's management and the reasonableness of significant accounting estimates, as well as the overall presentation of the financial statements. The auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and any internal control-related matters identified during the audit. This communication ensures that key stakeholders are informed of the audit's progress and findings.
In summary, the auditor's role is to provide an independent assessment of Cicis's financial statements, including an evaluation of the company's ability to continue as a going concern. This assessment is based on a thorough examination of the financial statements, internal controls, and accounting policies, and involves professional judgment and skepticism. The auditor's findings are communicated to those charged with governance to ensure transparency and accountability.