When auditing the financial statements for Embassy Suites, what should the auditors exercise throughout the audit?

According to the 2025 FDD, when performing an audit in accordance with generally accepted auditing standards, the auditors of Embassy Suites are required to exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditors must approach the audit with a questioning mind and critically assess the information provided by management. They should not assume that management is dishonest, but they should also not blindly trust management's representations without sufficient evidence.

This requirement ensures that the audit is conducted with objectivity and integrity. Professional judgment involves making informed decisions based on the auditor's training, knowledge, and experience. Professional skepticism involves a critical assessment of audit evidence and a willingness to challenge management's assertions.

For a prospective Embassy Suites franchisee, this indicates that the financial statements presented in the FDD have been subjected to a rigorous audit process. The franchisee can have more confidence in the accuracy and reliability of the financial information, which is crucial for making informed investment decisions. However, it is important to remember that even a well-conducted audit cannot guarantee the complete absence of errors or fraud, as the FDD states that reasonable assurance is a high level of assurance but is not absolute assurance.