When auditing Cream, what should the audit procedures be responsive to?
Cream 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 statement, 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 statement.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to the 2025 FDD, when performing an audit for Cream, the audit procedures should be responsive to the risks of material misstatement of the financial statement, whether due to fraud or error. These procedures involve examining evidence regarding the amounts and disclosures in the financial statement on a test basis.
In practical terms, this means that the auditor, Plante & Moran, PLLC, will focus on areas where there is a higher chance of mistakes or fraud that could significantly impact the accuracy of Cream's financial statements. This includes reviewing documents and records to verify the numbers presented and ensuring that all required information is properly disclosed.
This approach is standard in financial audits, as it allows auditors to concentrate their efforts on the most critical areas, providing a reasonable level of assurance that the financial statements are free from material misstatements. However, it's important to note that even with these procedures, there is no absolute guarantee that all misstatements will be detected, especially those resulting from fraud involving collusion or intentional misrepresentation.