What is the auditor's objective in auditing Endless Summer Sweets' financial statements?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
are available 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 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
FACT Professional, Inc. P: (818) 703-8410 · F: (818) 691-2922 6800 Owensmouth Ave, Suite 230, Canoga Park, CA 91303 gautam@factprofessional.com · www.factprofessional.com
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material misstatement when it exists.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 38)
What This Means (2024 FDD)
According to Endless Summer Sweets' 2024 Franchise Disclosure Document, the auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. The auditor clarifies that while reasonable assurance is a high level of assurance, it is not absolute. Therefore, it does not guarantee that an audit conducted according to generally accepted auditing standards will always detect a material misstatement.
The auditor notes that the risk of not detecting a material misstatement resulting from fraud is higher than that of one resulting from error. This is because fraud may involve activities like collusion, forgery, intentional omissions, misrepresentations, or the overriding of internal control mechanisms. The auditor also states that misstatements are considered material if they would likely influence the judgment of a reasonable user of the financial statements, either individually or in the aggregate.
In practical terms, this means a prospective Endless Summer Sweets franchisee should understand that the audit aims to provide a high degree of confidence in the accuracy of the financial statements, but it is not a perfect guarantee. The audit is designed to detect significant errors or fraudulent activities that could impact a potential investor's decision-making. Franchisees should also recognize the limitations of an audit and consider other factors and due diligence measures when evaluating the financial health of Endless Summer Sweets.