When auditing Crepe De Licious, what must be understood to design appropriate audit procedures?
Crepe_De_Licious 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 Crepe Delicious Holding USA, Inc.'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 Crepe Delicious Holding USA, Inc.'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 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to Crepe De Licious's 2025 Franchise Disclosure Document, when performing an audit in accordance with generally accepted auditing standards (GAAS), it is crucial to obtain an understanding of internal control relevant to the audit. This understanding is essential for designing audit procedures that are appropriate for the specific circumstances of Crepe De Licious. However, the audit is not conducted to express an opinion on the effectiveness of Crepe Delicious Holding USA, Inc.'s internal control, and accordingly, no such opinion is expressed.
The audit process involves several key steps. Auditors must exercise professional judgment and maintain professional skepticism throughout the audit. They need to identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. Based on this risk assessment, they design and perform audit procedures that are responsive to those risks, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
Furthermore, the auditors must evaluate the appropriateness of the accounting policies used by Crepe De Licious's management and the reasonableness of significant accounting estimates made by them. They also evaluate the overall presentation of the financial statements to ensure they are fairly presented. The auditors are also required to conclude whether there are conditions or events that raise substantial doubt about Crepe Delicious Holding USA, Inc.'s ability to continue as a going concern for a reasonable period of time.
Finally, the auditors must communicate with those charged with governance regarding the planned scope and timing of the audit, any significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures transparency and provides an opportunity for those in governance to address any concerns or issues raised during the audit process.