What does the auditor do to obtain an understanding of internal control relevant to the audit of 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 the 2025 FDD, the auditor's responsibility regarding internal controls at Craters & Freighters is to gain an understanding of these controls as they relate to the audit process. This understanding is used to design audit procedures that are appropriate for the given circumstances.
However, the auditor's objective is not to express an opinion on the effectiveness of Craters & Freighters' internal controls. Consequently, the auditor's report will not include any such opinion. The auditor's focus is on identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error, and then designing audit procedures that respond to these identified risks.
In addition to assessing internal controls, the auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audit, any significant findings, and certain internal control-related matters identified during the audit. This communication ensures that relevant parties are informed about the audit process and any issues that may arise.