Does Degree Wellness acknowledge the possibility of a discrepancy between estimated and actual financial results?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the auditor's report included in Item 23 acknowledges the possibility of discrepancies in financial statements. The auditor's responsibilities include obtaining reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. However, the report states that reasonable assurance is not absolute, and there is no guarantee that an audit will always detect a material misstatement.
The document indicates that the risk of not detecting a material misstatement resulting from fraud is higher than that of error because fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if they would likely influence the judgment of a reasonable user of the financial statements.
This disclosure highlights the inherent limitations of financial audits. While the auditor aims to provide a high level of assurance, franchisees should understand that audits are not foolproof and that financial results may vary from initial estimates due to unforeseen errors or fraudulent activities. Prospective franchisees should consider these factors and conduct their own due diligence when evaluating the financial viability of a Degree Wellness franchise.