What must the auditor evaluate regarding accounting policies used by Craters & Freighters?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
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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\neffectiveness of Craters & Freighters Franchise Company's internal control. Accordingly, no such opinion is\nexpressed.
- 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 Craters & Freighters Franchise Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, the auditor is responsible for evaluating the appropriateness of the accounting policies used by the company. Additionally, the auditor must assess the reasonableness of significant accounting estimates made by management and evaluate the overall presentation of the financial statements. This evaluation is part of performing an audit in accordance with generally accepted auditing standards (GAAS).
The auditor's role is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. This involves exercising professional judgment and maintaining professional skepticism throughout the audit process. The auditor designs and performs audit procedures responsive to the identified risks of material misstatement, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
For a prospective Craters & Freighters franchisee, this means that the financial statements included in the FDD have been reviewed by an independent auditor who has assessed whether the accounting policies are appropriate and the financial statements are presented fairly. This provides a level of assurance that the financial information is reliable and can be used to make informed decisions about investing in a Craters & Freighters franchise. However, it is important to note that reasonable assurance is not absolute, and there is always a risk that material misstatements may not be detected.