What is the auditor's responsibility in evaluating the appropriateness of accounting policies used by Fitstop?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
In performing an audit in accordance with GAAS, 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 Fitstop USA, INC.'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 Fitstop USA, INC.'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 auditfindings, and certain internal control-relatedmattersthat we identified during the audit.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, the auditor has a responsibility to evaluate the appropriateness of the accounting policies used by the company. This evaluation is part of a broader audit conducted in accordance with generally accepted auditing standards (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. This involves exercising professional judgment and maintaining professional skepticism throughout the audit.
To fulfill this responsibility, the auditor identifies and assesses the risks of material misstatement in the financial statements, whether due to fraud or error. They design and perform audit procedures responsive to those risks, which include examining 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 Fitstop's internal control.
In addition to evaluating accounting policies, the auditor also assesses the reasonableness of significant accounting estimates made by management and evaluates the overall presentation of the financial statements. Furthermore, the auditor must conclude whether there are conditions or events that raise substantial doubt about Fitstop's ability to continue as a going concern. 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.