What does the audit of Deka Lash include regarding examining evidence in the financial statements?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
In performing an audit in accordance with generally accepted auditing standards, we:
- Exercise professional judgement 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 funancial 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 DL 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 judgement, there are conditions or events, considered in the aggregate, that raise substantial doubt about DL Franchising, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to Deka Lash's 2024 Franchise Disclosure Document, the audit conducted in accordance with generally accepted auditing standards includes specific procedures related to examining evidence within the financial statements. As part of these procedures, the auditors identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. To address these risks, they design and perform audit procedures that include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
This means that the auditors will review documentation and other evidence supporting the figures and information presented in Deka Lash's financial statements. However, the audit is conducted on a "test basis," implying that not all transactions or items will be examined in detail. The auditors use their professional judgment to select samples and areas for testing based on their assessment of risk.
It is important to note that the auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement. While the audit aims to detect any significant errors or fraud, it is not a guarantee that all misstatements will be found. The auditors also obtain an understanding of Deka Lash's internal control relevant to the audit to design appropriate audit procedures, but they do not express an opinion on the effectiveness of the company's internal control.