What must the auditor evaluate regarding accounting policies and estimates when auditing Fly Fitness?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
ally or in the aggregate, they would influence the judgment made by a reasonable use based on the financial statements.
In performing an audit 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\neffectiveness of Fly Fitness Franchise LLC's internal control. Accordingly, no such opinion is\nexpressed.
- 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 21 — FINANCIAL STATEMENTS (FDD page 44)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the auditor must evaluate the appropriateness of the accounting policies used by Fly Fitness and the reasonableness of significant accounting estimates made by the company's management. The auditor must also evaluate the overall presentation of the financial statements. This evaluation is a standard part of an audit conducted in accordance with generally accepted auditing standards.
This means the auditor will assess whether Fly Fitness's accounting practices align with standard accounting principles and whether the estimates made by management are justifiable and reasonable. These estimates can include things like revenue recognition, depreciation, and provisions for potential losses. The auditor's assessment provides an independent opinion on the fairness and reliability of the financial statements.
For a prospective Fly Fitness franchisee, this indicates that the financial statements have been subjected to scrutiny by an independent auditor. This process helps ensure that the financial information presented is reliable and conforms to accounting standards. It also provides a level of assurance that the financial data accurately reflects the financial position and performance of Fly Fitness.