What is the auditor's responsibility concerning Exit's ability to continue as a going concern?
Exit 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 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 EXIT Realty Corp. International'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 EXIT Realty Corp. International's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Birmingham, Alabama
July 14, 2025
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the auditor's responsibility is to conclude whether there are conditions or events that raise substantial doubt about Exit's ability to continue as a going concern for a reasonable period of time. This involves exercising professional judgment and maintaining professional skepticism throughout the audit process. The auditor must evaluate the appropriateness of accounting policies, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
To fulfill this responsibility, the auditor must identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. They design and perform audit procedures responsive to those risks, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also needs to obtain 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 Exit's internal control.
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. This communication ensures transparency and provides an opportunity for those in governance to address any concerns raised during the audit process. This process helps to ensure that Exit's financial statements are presented fairly and accurately, giving potential franchisees confidence in the financial health of the company.
In the case of Exit Realty Corp. International's 2024 financial statements, the auditors included an Emphasis of Matter paragraph in their report, noting that Exit had generated recurring losses from operations, had a net capital deficiency, and had bank overdrafts, which raised substantial doubt about its ability to continue as a going concern for a reasonable period of time. However, the auditors also noted that management had plans to alleviate this doubt, and the auditor's opinion was not modified with respect to this matter.