How are misstatements considered material in the audit of Floors To Go's financial statements?

According to the 2025 Floors To Go Franchise Disclosure Document, misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

This definition is crucial for prospective franchisees because it sets the standard by which the accuracy and reliability of Floors To Go's financial reporting are judged. The independent auditor's report included in the FDD aims to provide reasonable assurance that the financial statements are free from material misstatement. However, it's important to recognize that this is not an absolute guarantee. The auditors' responsibilities include identifying and assessing the risks of material misstatement, designing audit procedures responsive to those risks, and evaluating the appropriateness of accounting policies used by Floors To Go.

For a potential Floors To Go franchisee, understanding this materiality threshold is important for assessing the financial health and stability of the franchisor. If misstatements, whether due to fraud or error, could potentially sway the judgment of a reasonable user of the financial statements, they are deemed material and should be carefully considered. This understanding helps franchisees make informed decisions based on reliable financial information.