When auditing Coffee News financial statements, what do the audit procedures include?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted auditing standards, 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 Coffee News USA, Inc.'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 Coffee News USA, Inc.'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 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to Coffee News' 2025 Franchise Disclosure Document, the auditor's responsibilities include several key procedures to ensure the financial statements are free from material misstatement. These procedures are designed to provide reasonable assurance, though not a guarantee, that the financial statements accurately reflect the company's financial position. The auditor exercises professional judgment and maintains professional skepticism throughout the audit to achieve this.
Specifically, the audit procedures involve identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. To address these risks, the auditor examines evidence regarding the amounts and disclosures in the financial statements on a test basis. This means that not every transaction is examined, but a representative sample is selected for review. The auditor also obtains an understanding of Coffee News' internal control system to design audit procedures that are appropriate for the circumstances, although they do not express an opinion on the effectiveness of the internal controls.
Furthermore, the auditor evaluates the appropriateness of the accounting policies used by Coffee News and the reasonableness of significant accounting estimates made by management. They also evaluate the overall presentation of the financial statements to ensure they are clear and understandable. Finally, the auditor concludes whether there are conditions or events that raise substantial doubt about Coffee News' ability to continue as a going concern for a reasonable period of time.
In addition to these procedures, 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 those responsible for overseeing the company's financial reporting are informed of any important issues that arise during the audit.