Does the evaluation of Deck Medic's financial statements include assessing the reasonableness of significant accounting estimates made by 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 independent auditor does evaluate the reasonableness of significant accounting estimates made by management. The auditor's responsibilities include forming an opinion on whether the financial statements are free from material misstatement. As part of this process, the auditor performs procedures to assess the appropriateness of the accounting policies used by Deck Medic's management and the reasonableness of significant accounting estimates.
This evaluation is a standard part of an audit conducted in accordance with generally accepted auditing standards. It provides assurance that the financial statements are presented fairly and are not misleading. For a prospective Deck Medic franchisee, this means that the financial statements have been scrutinized by an independent party, and the auditor has considered whether the estimates used in preparing the statements are reasonable.
The auditor's report does not guarantee that all misstatements will be detected, as reasonable assurance is a high but not absolute level of assurance. The auditor also assesses Deck Medic's ability to continue as a going concern. This involves evaluating whether there are conditions or events that raise substantial doubt about Deck Medic's ability to continue operating for a reasonable period.