What is the significance of the phrase 'auditing standards generally accepted in the United States of America' (GAAS) in the context of the Crave Franchising, LLC audit?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
results of its operations and its cash flows for the year ended December 31, 2024, in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether 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 one year after March 24, 2025.
Auditors' Responsibilities for the Audit 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 and auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore 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.
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audits.
- 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.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, the phrase 'auditing standards generally accepted in the United States of America' (GAAS) is significant because it indicates the framework under which Crave's financial statements were audited. The audit was conducted in accordance with GAAS, meaning the auditors followed a standardized set of guidelines and procedures to ensure the financial statements are presented fairly and are free from material misstatement. This provides a level of assurance to potential franchisees that the financial information presented by Crave has been vetted by independent professionals using established and recognized standards.
The auditor's responsibilities under GAAS include exercising professional judgment, maintaining professional skepticism, identifying and assessing risks of material misstatement, and obtaining an understanding of internal controls relevant to the audit. These standards also require the auditors to examine evidence supporting the amounts and disclosures in the financial statements on a test basis, evaluate the appropriateness of accounting policies used, and assess the reasonableness of significant accounting estimates made by Crave's management. The auditors must also conclude whether there are conditions that raise substantial doubt about Crave's ability to continue as a going concern.
However, it's important to note that while GAAS provides a high level of assurance, 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, as fraud may involve collusion or intentional omissions. Therefore, prospective franchisees should still carefully review the financial statements and consider seeking their own professional financial advice.