What must auditors conclude regarding Floyds 99's ability to continue as a going concern?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.
Auditor's Responsibilities for the Audits of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that audits conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 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.
To the Member Floyd's 99 Franchising, LLC
In performing audits in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audits.
- 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 audits 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.
- 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 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to Floyds 99's 2025 Franchise Disclosure Document, the auditors are required to evaluate whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern for a reasonable period of time. This evaluation is a critical part of the audit process, ensuring that the financial statements provide a fair and accurate representation of the company's financial health. The auditor's responsibility is to conclude whether such doubts exist based on their judgment.
To meet this responsibility, the auditors must exercise professional judgment and maintain professional skepticism throughout the audits. They 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. These procedures include examining evidence regarding the amounts and disclosures in the financial statements. The auditors also 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.
This assessment is crucial for prospective franchisees because it provides an independent opinion on the financial stability of Floyds 99. If the auditors express substantial doubt about the company's ability to continue as a going concern, it could indicate significant financial risks for potential franchisees. Conversely, a clean audit opinion suggests that the company is financially sound and capable of supporting its franchisees. This information helps franchisees make informed decisions about investing in a Floyds 99 franchise.