What responsibility does the management of DL Franchising, LLC have regarding internal controls for financial statements according to the Deka Lash FDD?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
In preparing the financial statements, management is required to evaluate whether 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 within one year after the date that the financial statements are available to be issued.
Auditor's Responsibility
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 generally accepted auditing standards 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, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgement made by a reasonable user based on the financial statements.
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to the 2024 Deka Lash Franchise Disclosure Document, the company's management is responsible for the integrity and objectivity of the financial statements. This means Deka Lash's management team must ensure the financial statements are presented fairly and accurately, following accounting principles generally accepted in the United States of America. These statements and related notes are representations of the company's management.
Specifically, Deka Lash's management is required to evaluate whether there are conditions or events that, when considered in total, raise significant doubts about the company's ability to continue operating as a going concern within one year after the date the financial statements are issued. This evaluation is a critical part of preparing the financial statements and ensuring their reliability.
Furthermore, in preparing financial statements, Deka Lash's management must make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. These estimates are used for items such as receivables valuation, revenue recognition, inventory valuation, and the depreciable lives of fixed assets. Actual results could differ materially from these estimates, highlighting the importance of management's judgment and expertise in financial reporting. These policies must conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.