When auditing Deer Solution's financial statements, what judgment should be exercised?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 FDD Document
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 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 Deer Solution Franchising, LLC'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 Deer Solution Franchising, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 23 — RECEIPTS (FDD pages 55–246)
What This Means (2025 FDD)
According to Deer Solution's 2025 Franchise Disclosure Document, auditors must exercise professional judgment and maintain professional skepticism throughout the audit. This involves identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. Auditors design and perform audit procedures responsive to these risks, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
Furthermore, auditors need to understand the internal controls relevant to the audit to design appropriate audit procedures. However, the audit does not aim to express an opinion on the effectiveness of Deer Solution's internal control. Auditors must evaluate the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
Ultimately, the auditor must conclude whether there are conditions or events that raise substantial doubt about Deer Solution's ability to continue as a going concern for a reasonable period. This comprehensive approach ensures that the financial statements are presented fairly and in accordance with generally accepted accounting principles.