What is the auditor's responsibility regarding the appropriateness of accounting policies used by Deka Lash?
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 auditor has a responsibility to evaluate the appropriateness of the accounting policies used by the company. This evaluation is part of a broader audit conducted in accordance with generally accepted auditing standards. The auditor's role includes assessing the reasonableness of significant accounting estimates made by the management team and evaluating the overall presentation of the financial statements.
In performing the audit, the auditor exercises professional judgment and maintains professional skepticism. They 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. These procedures involve examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
The auditor also obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, though they do not express an opinion on the effectiveness of Deka Lash's internal control. Furthermore, the auditor concludes whether there are conditions or events that raise substantial doubt about Deka Lash's ability to continue as a going concern for a reasonable period of time.
This process provides reasonable assurance that the financial statements are free from material misstatement. However, it's important to note that this is not an absolute guarantee, and there remains a risk that material misstatements, particularly those resulting from fraud, may not be detected. The auditor's evaluation of accounting policies is a critical component of ensuring the reliability and accuracy of the financial information presented in the financial statements.