What should be evaluated regarding accounting policies used by Floors To Go during an audit?
Floors_To_Go 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 the Company'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.
Source: Item 23 — RECEIPTS (FDD pages 47–204)
What This Means (2025 FDD)
According to the 2025 Floors To Go FDD, during an audit, the appropriateness of the accounting policies used by management should be evaluated. Additionally, the reasonableness of significant accounting estimates made by the management should be assessed, and the overall presentation of the financial statements should be evaluated.
This means that the auditors will scrutinize the accounting methods Floors To Go uses to ensure they are in line with generally accepted accounting principles. They will also check if the estimates made by the company's management, such as those related to potential losses or revenues, are reasonable and well-supported. This evaluation aims to provide assurance that the financial statements accurately reflect the company's financial position and performance.
For a prospective Floors To Go franchisee, this indicates that the franchisor's financial reporting is subject to external scrutiny. This can provide some comfort that the financial information presented by Floors To Go is reliable and has been vetted by independent auditors. Franchisees may want to review the auditor's report and the notes to the financial statements for any specific issues or concerns raised during the audit.