What is the auditor's responsibility regarding the overall presentation of Even Hotels' financial statements?
Even_Hotels Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
- x 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 the Company's internal control. Accordingly, no such opinion is expressed.
- x 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.
- x Conclude whether, in our judgment, 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 a reasonable period of time.
Source: Item 23 — RECEIPTS (FDD pages 99–438)
What This Means (2025 FDD)
According to Even Hotels' 2025 Franchise Disclosure Document, the auditor is responsible for evaluating the overall presentation of the consolidated financial statements of Six Continents Hotels, Inc., the parent company of the Even Hotels franchise. This evaluation is part of the audit performed in accordance with auditing standards generally accepted in the United States of America (US GAAS). The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion.
To achieve this, 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 to design appropriate audit procedures, although 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 and the reasonableness of significant accounting estimates made by management. They also conclude whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern for a reasonable period of time. The auditor is required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.
For a prospective Even Hotels franchisee, this means that the financial statements presented in the FDD have been reviewed by an independent auditor who has assessed whether they are presented fairly and in accordance with generally accepted accounting principles. This provides a level of assurance that the financial information is reliable and can be used to make informed decisions about investing in the franchise. However, it is important to note that reasonable assurance is not absolute, and there is always a risk that material misstatements may not be detected.