What is the auditor's objective regarding Crave Cookies' financial statements?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
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 an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is 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 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's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The auditor also aims to issue a report that includes their opinion on the financial statements. This assurance, while high, is not absolute, and there's no guarantee that an audit will always detect a material misstatement. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error because fraud may involve actions like collusion or forgery.
For a potential Crave Cookies franchisee, this means that the financial statements have been examined by an independent party to ensure they are presented fairly and accurately. However, it's important to understand that even audited financial statements are not foolproof and may not uncover all instances of fraud or error. Material misstatements are those that could influence the judgment of a reasonable user of the financial statements.
The audit involves several procedures, including exercising professional judgment, assessing risks of material misstatement, examining evidence on a test basis, understanding internal controls (though not expressing an opinion on their effectiveness), evaluating accounting policies and estimates, and concluding whether there is substantial doubt about Crave Cookies' ability to continue as a going concern. The auditor is also required to communicate with those in charge of governance regarding the audit's scope, findings, and internal control-related matters.
This process is standard practice in franchise auditing, ensuring that financial information is reliable and transparent for potential investors and franchisees. While the audit provides a level of confidence in the financial statements, franchisees should still conduct their own due diligence and seek professional advice to fully understand the financial health and stability of Crave Cookies.