Are the audit procedures for Crab N Spice performed on a complete or test basis?
Crab_N_Spice Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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 pages 40–50)
What This Means (2024 FDD)
According to Crab N Spice's 2024 Franchise Disclosure Document, the audit procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. This means that the auditor, Omar Alnuaimi, CPA, does not review every single transaction or piece of data. Instead, they use sampling and other techniques to gain reasonable assurance about the fairness of the financial statements.
Specifically, the audit involves identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. The auditor designs and performs audit procedures responsive to those risks, which include examining evidence on a test basis. The auditor also obtains an understanding of internal control relevant to the audit but does not express an opinion on the effectiveness of the company's internal control.
Additionally, the audit includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. The auditor concludes whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern. These procedures are standard practice in financial audits to provide an opinion on the fair presentation of the financial statements.