When auditing Engel & Volkers' consolidated financial statements, what must the auditor do regarding professional judgment and skepticism?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 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 consolidated 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 consolidated 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 Engel & Völkers Americas, Inc. and Subsidiary'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 consolidated financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Engel & Völkers Americas, Inc. and Subsidiary's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, the auditor is required to exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditor must critically assess the information provided by Engel & Volkers and not assume that the management is always honest or accurate. This approach helps the auditor to identify and properly assess the risks of material misstatement within the consolidated financial statements, whether those misstatements are due to fraud or error.
To address these risks, the auditor designs and performs audit procedures that are responsive to the identified risks. These procedures include examining evidence related to the amounts and disclosures in the consolidated financial statements on a test basis. The auditor also needs to understand Engel & Volkers' internal control relevant to the audit. However, the audit's purpose is to design appropriate audit procedures and not to express an opinion on the effectiveness of the company's internal control. Therefore, the auditor's report will not include such an opinion.
Furthermore, the auditor must evaluate the appropriateness of the accounting policies used by Engel & Volkers and the reasonableness of significant accounting estimates made by management. The auditor also evaluates the overall presentation of the consolidated financial statements to ensure they are fairly presented. Finally, the auditor must conclude whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about Engel & Volkers' ability to continue as a going concern for a reasonable period of time. These responsibilities ensure a thorough and objective audit, providing stakeholders with reliable financial information.