Is the evaluation of accounting policies for Endless Summer Sweets limited to only the policies used?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
In performing an audit in accordance with generally accepted auditing standards, 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 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 financial 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 Endless Summer Sweets Franchising Inc.'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 judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Endless Summer Sweets Franchising Inc.'s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 38)
What This Means (2024 FDD)
According to Endless Summer Sweets' 2024 Franchise Disclosure Document, the evaluation of accounting policies includes assessing both the appropriateness of the policies used and the reasonableness of significant accounting estimates made by management. The audit conducted by the independent auditor, FACT Professional, Inc., involves several key steps beyond just looking at the policies themselves.
Specifically, the auditors exercise professional judgment and maintain skepticism, identify risks of material misstatement, and examine evidence regarding amounts and disclosures in the financial statements. They also obtain an understanding of internal controls, though without expressing an opinion on their effectiveness. The evaluation extends to the overall presentation of the financial statements, ensuring they conform to generally accepted accounting principles.
Furthermore, the auditors consider whether there are conditions or events that raise substantial doubt about Endless Summer Sweets' ability to continue as a going concern. They also communicate with those charged with governance regarding the audit's scope, timing, significant findings, and internal control matters identified during the audit. This comprehensive approach ensures that the audit is not limited to merely reviewing the stated accounting policies but involves a thorough examination of the financial statements and related disclosures.