What is the auditor's responsibility in evaluating the reasonableness of significant accounting estimates made by Counselor Realty's management?
Counselor_Realty 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, the auditor's responsibility includes evaluating the reasonableness of significant accounting estimates made by the company's management. This evaluation is part of a broader audit performed in accordance with Generally Accepted Auditing Standards (GAAS). The auditor must exercise professional judgment and maintain professional skepticism throughout the audit.
To fulfill this responsibility, the auditor must 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. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also needs to obtain an understanding of internal control relevant to the audit to design appropriate audit procedures, although the audit does not aim to express an opinion on the effectiveness of Counselor Realty's internal control.
Furthermore, the auditor must conclude whether there are conditions or events that, considered in the aggregate, raise substantial doubt about Counselor Realty's ability to continue as a going concern for a reasonable period. This comprehensive evaluation ensures that the financial statements are presented fairly and in accordance with accounting principles generally accepted in the United States of America (GAAP).