What is the auditor's objective when auditing the Engineering For Kids financial statements?
Engineering_For_Kids Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the 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 judgement made by a reasonable user based on the financial statements.
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 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 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 Engineering for Kids International, LLC'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 financial statements.
- ➢ Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Engineering for Kids International, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2025 FDD)
According to the 2025 Engineering For Kids Franchise Disclosure Document, the auditor's primary objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The auditor then issues a report containing their opinion on the financial statements. While reasonable assurance is a high level of assurance, it is not absolute, and there is no guarantee that an audit will always detect a material misstatement.
The risk of not detecting a material misstatement resulting from fraud is higher than that of error, as fraud may involve intentional concealment, such as collusion or forgery. Material misstatements are those that could influence the judgment of a reasonable user of the financial statements.
To achieve their objective, the auditor exercises professional judgment and maintains professional skepticism throughout the audit. They identify and assess the risks of material misstatement, design and perform audit procedures responsive to those risks, and examine evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also obtains an understanding of internal control relevant to the audit, evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, and concludes whether there are conditions or events that raise substantial doubt about Engineering For Kids's ability to continue as a going concern.
In short, the auditor's role is to provide an independent assessment of the fairness and reliability of Engineering For Kids's financial statements, giving prospective franchisees (and other stakeholders) confidence in the financial information presented.