What must auditors identify and assess regarding Deck Medic's financial statements?
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 are responsible for identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error. This involves designing and performing audit procedures that respond to these risks, including examining evidence related to the amounts and disclosures within the financial statements on a test basis.
Furthermore, the auditors must gain an understanding of Deck Medic's internal control mechanisms relevant to the audit. This understanding is used to design appropriate audit procedures but does not extend to expressing an opinion on the effectiveness of Deck Medic's internal controls. The auditors also evaluate the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
Finally, the auditors must determine whether there are conditions or events that, when considered together, raise substantial doubt about Deck Medic's ability to continue as a going concern for a reasonable period of time. This assessment is crucial for providing a comprehensive audit opinion on the financial health and stability of Deck Medic.