When auditing Floors To Go, what should be evaluated in addition to the appropriateness of accounting policies?
Floors_To_Go Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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 the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 23 — RECEIPTS (FDD pages 47–204)
What This Means (2025 FDD)
According to the 2025 Floors To Go Franchise Disclosure Document, when performing an audit, several factors beyond just accounting policies should be evaluated. The auditors must assess the reasonableness of significant accounting estimates made by the Floors To Go management. Additionally, the overall presentation of the financial statements needs to be evaluated to ensure they accurately reflect the company's financial position.
Furthermore, auditors must determine if there are any conditions or events that, when considered together, might raise substantial doubt about Floors To Go's ability to continue as a going concern for a reasonable period. This involves analyzing various financial and operational factors that could impact the company's long-term viability.
In practical terms, this means that a Floors To Go franchisee can have some assurance that the company's financial statements are being thoroughly scrutinized. The audit aims to provide reasonable assurance that the financial statements are free from material misstatements, whether due to fraud or error. However, it is important to note that even a GAAS audit does not guarantee the detection of all misstatements.