What is the auditors' objective when auditing Even Hotels' consolidated financial statements?
Even_Hotels Franchise · 2025 FDDAnswer from 2025 FDD Document
for the Consolidated Financial Statements*
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date the consolidated financial statements are available to be issued.
Auditors' Responsibilities for the Audit of the Consolidated Financial Statements
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 auditors' 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 US GAAS 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.
In performing an audit in accordance with US GAAS, we:
- x Exercise professional judgment and maintain professional skepticism throughout the audit.
- x 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.
Source: Item 23 — RECEIPTS (FDD pages 99–438)
What This Means (2025 FDD)
According to Even Hotels' 2025 Franchise Disclosure Document, the auditors' objective is to obtain reasonable assurance that the consolidated financial statements are free from material misstatement, whether due to fraud or error. Their goal is to issue an auditor's report that includes their professional opinion on the financial statements. The FDD clarifies that 'reasonable assurance' implies a high level of confidence, but it is not an absolute guarantee that all misstatements will be detected.
The document emphasizes that the risk of not detecting a material misstatement resulting from fraud is higher than that of an error. This is because fraud may involve intentional concealment, such as collusion, forgery, or intentional omissions, which are designed to bypass internal controls. The auditors must exercise professional judgment and maintain skepticism throughout the audit to identify and assess these risks.
To achieve their objectives, the auditors perform various procedures, including examining evidence related to the amounts and disclosures in the financial statements on a test basis. They also evaluate the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by the management of Even Hotels. Furthermore, the auditors assess the overall presentation of the consolidated financial statements to ensure they are fairly presented in accordance with accounting principles generally accepted in the United States of America.