What is the auditor's responsibility regarding the exercise of professional skepticism throughout the audit of 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 to maintain professional skepticism throughout the audit process. This means the auditor must approach the audit with a questioning mind and critically assess the evidence presented by Engel & Volkers. This skepticism is crucial for identifying and addressing potential risks of material misstatement in the financial statements, whether due to fraud or error.
The auditor's responsibilities extend to identifying and assessing risks of material misstatement in the consolidated financial statements. To address these risks, the auditor designs and performs audit procedures, such as examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditor also needs to understand Engel & Volkers' internal control system to design appropriate audit procedures, though the audit does not aim to express an opinion on the effectiveness of the internal controls themselves.
Furthermore, the auditor must evaluate the appropriateness of the accounting policies used by Engel & Volkers, as well as 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 determine whether there are conditions or events that raise substantial doubt about Engel & Volkers' ability to continue as a going concern. These steps ensure a thorough and objective audit, providing a more reliable financial picture for potential franchisees.