What is the auditor's responsibility in judging Floyds 99's ability to continue as a going concern?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
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.
Source: Item 23 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to Floyds 99's 2025 Franchise Disclosure Document, the auditor has specific responsibilities related to assessing the company's ability to continue as a going concern. The auditor's role is to conclude whether there are conditions or events that, when considered in total, raise significant doubt about Floyds 99's ability to continue operating for a reasonable period.
To fulfill this responsibility, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. This involves identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error, and designing audit procedures that respond to these risks. These procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditor also evaluates the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement. However, it's important to note that reasonable assurance is not absolute, and there is no guarantee that audits conducted according to Generally Accepted Auditing Standards (GAAS) will always detect a material misstatement. The auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters identified during the audits.
In summary, the auditor's responsibility is to evaluate Floyds 99's ability to continue as a going concern by assessing financial statements for accuracy and potential risks, while maintaining professional judgment and skepticism. This assessment helps ensure that the financial statements provide a fair representation of the company's financial position and performance for prospective franchisees.