What must auditors evaluate regarding accounting policies used by Deck Medic's management?
Deck_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
if there is a substantial likelihood that, individually or in aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, 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\nerror, 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 to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Deck Medic, 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.
Source: Item 23 — RECEIPTS (FDD pages 43–228)
What This Means (2024 FDD)
According to Deck Medic's 2024 Franchise Disclosure Document, the auditors must evaluate the appropriateness of the accounting policies used by Deck Medic's management. Additionally, they must assess the reasonableness of significant accounting estimates made by the management. The auditors are also responsible for evaluating the overall presentation of the financial statements.
This evaluation is part of the broader audit process, which aims to provide reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. However, it's important to note that this assurance is not absolute, and there's always a risk that a material misstatement may not be detected.
For a prospective Deck Medic franchisee, this means that the financial statements have been subjected to scrutiny by independent auditors who have assessed the accounting policies and estimates used in their preparation. This can provide a level of comfort regarding the reliability of the financial information presented. However, franchisees should still carefully review the financial statements and consult with their own financial advisors to fully understand the financial position of Deck Medic.