When conducting an audit for Deer Solution, what level of judgment and skepticism is required?
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 are required to exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditor must use their expertise to make informed decisions and maintain a questioning mind when evaluating the financial statements. This approach is essential to identify and assess the risks of material misstatement, whether due to fraud or error. The auditor must design and perform audit procedures that are responsive to these identified risks, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
The auditor's responsibilities also include obtaining an understanding of Deer Solution's internal control system relevant to the audit. This understanding is used to design audit procedures that are appropriate for the circumstances, but it does not extend to expressing an opinion on the effectiveness of the company's internal control. The auditor must 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.
Furthermore, 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 of time. The auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit. This ensures transparency and accountability in the audit process.