As part of the audit, is the reasonableness of significant accounting estimates made by Deka Lash's management evaluated?
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 independent auditor evaluates the reasonableness of significant accounting estimates made by the company's management. This evaluation is part of the audit process conducted in accordance with generally accepted auditing standards. The auditor's responsibilities include assessing the appropriateness of accounting policies and the overall presentation of the financial statements.
This process is important for prospective franchisees because it provides a level of assurance that the financial information presented by Deka Lash is reliable and fairly represents the company's financial position. By evaluating the reasonableness of accounting estimates, the auditor helps to ensure that the financial statements are not materially misstated due to management's judgments or assumptions.
However, it's important to note that while the auditor provides reasonable assurance, it is not an absolute guarantee that all misstatements will be detected. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve intentional concealment. Therefore, while the audit offers a degree of confidence in the financial statements, franchisees should still conduct their own due diligence and seek professional advice when evaluating the franchise opportunity.