During audits, what level of judgment and skepticism is expected to be exercised by auditors of Floyds 99?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
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, auditors are expected to exercise professional judgment and maintain professional skepticism throughout the audits. This means the auditors must have a questioning mind and critically assess the audit evidence. They should not automatically assume that the information provided by the company is correct, even if it appears to be so.
Auditors must 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 on a test basis. This implies that auditors will not check every single transaction but will use sampling techniques to gain reasonable assurance.
The auditors' responsibilities also include obtaining an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances. However, the auditors are not expressing an opinion on the effectiveness of Floyds 99's internal control. Furthermore, the auditors must 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. Finally, the auditors must conclude 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.