What does the auditor evaluate regarding accounting policies used by Cream?

According to Cream's 2025 Franchise Disclosure Document, the auditor evaluates the appropriateness of the accounting policies used by management. Additionally, the auditor assesses the reasonableness of significant accounting estimates made by management and evaluates the overall presentation of the financial statement. This evaluation is part of a broader audit conducted in accordance with auditing standards generally accepted in the United States of America (GAAS).

This means that the auditor, in this case, Plante & Moran, PLLC, doesn't just check the mathematical accuracy of Cream's financial statements. They also scrutinize whether Cream's management has chosen suitable accounting methods and made reasonable judgments in areas where precise figures aren't available. For example, assessing the useful life of equipment or estimating potential bad debts involves management estimates that the auditor will review for reasonableness.

The auditor's evaluation provides assurance to potential franchisees that Cream's financial statements are presented fairly and in accordance with generally accepted accounting principles. This helps franchisees make informed decisions based on reliable financial information. The auditor's opinion adds credibility to the financial statements, as an independent expert has reviewed and approved the accounting practices used.

However, it is important to note that the audit provides reasonable assurance, not absolute assurance. This means there is still a risk that material misstatements, especially those resulting from fraud, may not be detected. Prospective franchisees should consider this inherent limitation of the audit process when reviewing Cream's financial statements.