What is the auditor's responsibility regarding the reasonableness of significant accounting estimates made by Exit Realty Corp. International's management?
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 has a responsibility to evaluate the reasonableness of significant accounting estimates made by Exit Realty Corp. International's management. This evaluation is part of a broader audit performed in accordance with generally accepted auditing standards. The auditor's role includes exercising professional judgment and maintaining professional skepticism throughout the audit process.
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. As part of these procedures, the auditor examines 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, though not for the purpose of expressing an opinion on the effectiveness of Exit's internal control.
In addition to evaluating accounting estimates, the auditor also evaluates the appropriateness of the accounting policies used and the overall presentation of the financial statements. Furthermore, the auditor must conclude whether there are conditions or events that raise substantial doubt about Exit Realty Corp. International's ability to continue as a going concern. The auditor is also required to communicate with those charged with governance regarding the scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.
For a prospective Exit franchisee, this means that the financial statements have been subjected to scrutiny by an independent auditor who has specifically assessed whether the significant accounting estimates made by Exit's management are reasonable. This provides a level of assurance that the financial information presented is reliable and fairly represents the company's financial position. It is important to note that while the auditor provides an opinion on the financial statements, they do not guarantee the accuracy of every figure, as the audit is conducted on a test basis and involves professional judgment.