What is the auditor's responsibility regarding the maintenance of professional skepticism throughout the audit of Exit Realty Corp. International?
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, the auditor is required to exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditor must have a questioning mind and critically assess the audit evidence, rather than assuming that management is always honest. This skepticism is crucial for identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error.
The auditor's responsibilities extend to designing and performing audit procedures that are responsive to the identified risks. These procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditor must also gain an understanding of Exit's internal control relevant to the audit to design appropriate audit procedures. However, the auditor's role is not to express an opinion on the effectiveness of Exit's internal control.
Furthermore, the auditor is tasked with evaluating the appropriateness of the accounting policies used by Exit and the reasonableness of significant accounting estimates made by its management. They must also evaluate the overall presentation of the financial statements. Finally, the auditor must conclude whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about Exit's ability to continue as a going concern for a reasonable period of time.
In addition to these responsibilities, 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 by the auditor.