What is the auditor's responsibility regarding the evaluation of the reasonableness of significant accounting estimates made by management for Counselor Realty?
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 has specific responsibilities concerning the evaluation of accounting estimates. As part of an audit conducted in accordance with Generally Accepted Auditing Standards (GAAS), the auditor must evaluate the reasonableness of significant accounting estimates made by Counselor Realty's management. This evaluation is one of several key responsibilities the auditor undertakes to form an opinion on the fairness of the financial statements.
In addition to evaluating accounting estimates, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. They also 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 obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, though not for the purpose of expressing an opinion on the effectiveness of Counselor Realty's internal control. Finally, the auditor concludes whether there are conditions or events that raise substantial doubt about Counselor Realty's ability to continue as a going concern for a reasonable period of time.
For a prospective Counselor Realty franchisee, this means that the financial statements included in the FDD have been subjected to a review by an independent auditor who has specifically assessed the reasonableness of the accounting estimates made by the company's management. This provides a level of assurance that the financial information presented is reliable and fairly represents the company's financial position.