What is the auditor's responsibility regarding the examination of evidence on a test basis regarding the amounts in Exit Realty Corp. International's financial statements?
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.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, when performing an audit in accordance with generally accepted auditing standards, the auditor's procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. This means the auditor does not review every single transaction or piece of data, but rather selects a sample to gain reasonable assurance about the accuracy and completeness of the financial statements. This approach is standard in auditing to balance the need for thoroughness with practical constraints of time and cost.
The auditor's responsibilities also include exercising professional judgment and maintaining professional skepticism throughout the audit. They must 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. The auditor also needs to obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate for the circumstances. However, the audit is not for the purpose of expressing an opinion on the effectiveness of Exit's internal control, and accordingly, no such opinion is expressed.
Furthermore, the auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. The auditor must also conclude whether, in their judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Exit's ability to continue as a going concern for a reasonable period of time. Finally, 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.