What is the purpose of the audit procedures performed by the auditors of Counselor Realty?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
udit of the Financial Statements**
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms.
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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, the auditors' responsibilities are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error. Their goal is to issue an auditor's report that includes their opinion on the financial statements. While the auditors aim for a high level of assurance, they clarify that it is not an absolute guarantee that all material misstatements will be detected. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error.
The audit procedures include exercising professional judgment and maintaining professional skepticism throughout the audit. The auditors 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 involve examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
Furthermore, the auditors obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. However, they do not express an opinion on the effectiveness of the company's internal control. They 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. The auditors also conclude 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 presented in the FDD have been examined by independent auditors who have followed established standards to provide an opinion on their fairness and accuracy. This process helps to ensure that the financial information provided is reliable, though it does not guarantee the complete absence of errors or fraud. Franchisees can use this information to make more informed decisions about investing in a Counselor Realty franchise.