What is the auditor's responsibility regarding significant accounting estimates made by Crave Cookies' management?
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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the auditor has a responsibility to evaluate the reasonableness of significant accounting estimates made by the company's management. This evaluation is part of a broader audit performed in accordance with generally accepted auditing standards (GAAS). The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion.
In practical terms, this means the auditor will scrutinize the estimates made by Crave Cookies' management when preparing the financial statements. These estimates can involve various aspects of the business, such as allowances for potential credit losses on receivables or the assessment of contingent liabilities. The auditor will assess whether these estimates are reasonable and based on sound judgment, using the available evidence and their professional expertise.
This responsibility is important for prospective franchisees because it provides an additional layer of scrutiny over the financial statements. While the auditor's assurance is not absolute, it does offer a degree of confidence that the financial information presented by Crave Cookies is reliable and fairly represents the company's financial position. Franchisees can take comfort in knowing that an independent auditor has reviewed the significant accounting estimates, which can impact the overall financial health and stability of the franchise system.