Is the examination of evidence regarding amounts and disclosures in Desi District's financial statements comprehensive or based on a sample?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
le to be issued.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of 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.
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or\nerror, and design and perform audit procedures responsive to those risks. Such procedures include\nexamining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
924 W. 75th Street Suite 120 - 189 Naperville, IL 60565 +1 (815) 348-2421 omar@napercpa.com
- 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\neffectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting\nestimates made by management, as well as evaluate the overall presentation of the financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, the auditor's responsibility includes obtaining reasonable assurance that the financial statements are free of material misstatement, whether due to fraud or error. However, this assurance is not absolute. The audit is conducted according to Generally Accepted Auditing Standards (GAAS). As part of this process, the auditor exercises professional judgment and maintains professional skepticism throughout the audit.
Specifically, the audit procedures include examining evidence regarding the amounts and disclosures in the financial statements, but this examination is done on a test basis. This means the auditors do not review every single transaction or piece of data, but rather use sampling techniques to gain reasonable assurance. The auditor also obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, but does not express an opinion on the effectiveness of the company's internal control.
Additionally, the auditor evaluates the appropriateness of accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements. The auditor also concludes whether there are conditions or events that raise substantial doubt about Desi District's ability to continue as a going concern. This information is crucial for prospective franchisees to understand the level of scrutiny applied to the financial statements and the inherent limitations of an audit.