What is the auditor's responsibility regarding the appropriateness of accounting policies used by Engel & Volkers?
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 has specific responsibilities regarding the appropriateness of the accounting policies used in the company's financial statements. As part of their audit, conducted in accordance with generally accepted auditing standards, the auditor must evaluate whether the accounting policies used by Engel & Volkers' management are appropriate for their business. They also assess the reasonableness of significant accounting estimates made by the management team. Finally, the auditor evaluates the overall presentation of the consolidated financial statements to ensure they are fairly presented.
This evaluation is crucial because it ensures that Engel & Volkers' financial statements are prepared using sound and consistent accounting practices. If the auditor finds that the accounting policies are not appropriate or that the estimates are unreasonable, they are required to bring this to the attention of those charged with governance. This process helps to maintain the integrity and reliability of the financial information provided to potential investors, franchisees, and other stakeholders.
For a prospective Engel & Volkers franchisee, this means that the financial statements have been scrutinized by an independent auditor who has assessed the appropriateness of the accounting methods used. While the audit provides reasonable assurance, it's not an absolute guarantee against misstatements. However, it does offer a level of confidence that the financial information is presented fairly and in accordance with generally accepted accounting principles. Franchisees can review these audited statements to gain a better understanding of the financial health and stability of Engel & Volkers.