During the audit of Crawlspace Medic, what risks must be identified and assessed?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 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 the Company'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 the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 42)
What This Means (2024 FDD)
According to the 2024 Crawlspace Medic Franchise Disclosure Document, the audit must identify and assess risks of material misstatement of the financial statements, whether due to fraud or error. The audit procedures should be responsive to these risks, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
The audit also requires obtaining an understanding of internal control relevant to the audit in order to design appropriate audit procedures. However, the audit does not aim to express an opinion on the effectiveness of Crawlspace Medic's internal control.
Furthermore, the audit involves evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management. It also includes evaluating the overall presentation of the financial statements and concluding whether there are conditions or events that raise substantial doubt about Crawlspace Medic's ability to continue as a going concern.