What aspects of accounting policies should the auditor evaluate during the audit of Crave Cookies?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Crave Cookies Franchising, LLC'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 Crave Cookies Franchising, LLC's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the auditor is responsible for evaluating the appropriateness of the accounting policies used by the company and the reasonableness of significant accounting estimates made by management. This evaluation is a key part of ensuring that the financial statements present a fair and accurate view of Crave Cookies' financial position. The auditor must also evaluate the overall presentation of the financial statements to ensure they are clear, consistent, and compliant with accounting standards.
Specifically, the auditor must determine if the accounting principles selected by Crave Cookies are suitable for its business and industry. They also assess whether management's estimates, such as those related to potential credit losses or the valuation of inventory, are reasonable and supported by available evidence. This involves a thorough review of the methods, data, and assumptions used by management in developing these estimates.
Furthermore, the auditor needs to consider if there are any conditions or events that, when taken together, might raise doubts about Crave Cookies' ability to continue operating as a going concern. This assessment is crucial for providing stakeholders with a clear understanding of the company's financial stability and long-term viability. The auditor is also required to communicate with those in charge of governance regarding the planned scope and timing of the audit, any significant findings, and any issues related to internal controls that were identified during the audit.
For a potential Crave Cookies franchisee, this means that the financial statements have been examined by an independent expert who has assessed whether the company's accounting practices are sound and whether the financial information presented is reliable. This can provide a level of comfort and assurance when making investment decisions.