What is the auditor's responsibility regarding the identification of risks of material misstatement of Engel & Volkers' consolidated financial statements?
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.
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 related to identifying and assessing risks of material misstatement in the company's consolidated financial statements. These responsibilities are carried out in accordance with generally accepted auditing standards.
The auditor is required to identify and assess the risks of material misstatement of the consolidated financial statements, whether these misstatements are due to fraud or error. Based on this assessment, the auditor designs and performs audit procedures that are responsive to the identified risks. These procedures include examining evidence regarding the amounts and disclosures in the consolidated financial statements, which is done on a test basis.
Furthermore, the auditor must obtain an understanding of internal control relevant to the audit to design appropriate audit procedures. However, the auditor's role is not to express an opinion on the effectiveness of Engel & Volkers' internal control, and accordingly, no such opinion is provided. The auditor also exercises professional judgment and maintains professional skepticism throughout the audit, ensuring a critical and questioning mindset.
In summary, the auditor's role is to provide reasonable assurance that the consolidated financial statements are free from material misstatement, whether due to fraud or error, and this involves a thorough process of risk assessment and the implementation of appropriate audit procedures. This process helps to ensure the reliability and accuracy of the financial information presented by Engel & Volkers.