What is the auditor's responsibility regarding the maintenance of professional judgment 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 is required to exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditor must make informed decisions and critically assess the information presented by Engel & Volkers, rather than blindly accepting it. This approach is essential to ensure the financial statements are free from material misstatements, whether due to fraud or error.
The auditor's responsibilities extend to identifying and assessing risks of material misstatement in the consolidated financial statements. They design and perform audit procedures responsive to these risks, which include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also obtains an understanding of Engel & Volkers' internal control relevant to the audit to design appropriate audit procedures, though they do not express an opinion on the effectiveness of the company's internal control.
Furthermore, the auditor evaluates the appropriateness of accounting policies used by Engel & Volkers' management and the reasonableness of significant accounting estimates. They also evaluate the overall presentation of the consolidated financial statements. The auditor must conclude whether there are conditions or events that raise substantial doubt about Engel & Volkers' ability to continue as a going concern. These responsibilities ensure that the financial statements provide a fair and accurate representation of Engel & Volkers' financial position, which is crucial information for prospective franchisees.