What level of assurance does the audit provide regarding the accuracy of Engel & Volkers' financial statements?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, the audit of the company's financial statements aims to provide reasonable assurance that the statements are free from material misstatement, whether due to fraud or error. The auditor's report includes an opinion on whether the financial statements present fairly the financial position, results of operations, and cash flows of Engel & Volkers Americas, Inc. and Subsidiary in accordance with accounting principles generally accepted in the United States of America. This means the auditor believes the statements are presented honestly and accurately.
However, the FDD clarifies that reasonable assurance is not absolute assurance. While the audit is conducted according to generally accepted auditing standards, there is no guarantee that it will detect every material misstatement. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error because fraud may involve intentional concealment.
For a prospective Engel & Volkers franchisee, this means that while the financial statements have been audited and deemed to present fairly the company's financial position, there is still a degree of risk that some misstatements, especially those resulting from fraud, may not have been detected. Therefore, while the audit provides a level of confidence in the accuracy of the financial statements, franchisees should still exercise due diligence and consider seeking independent financial advice.