When evaluating Fly Fitness's financial statements, what must be evaluated regarding accounting policies and estimates?
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, when evaluating the financial statements, it's important to assess the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by the management of Fly Fitness. Additionally, one must consider whether there are conditions or events that raise substantial doubt about Fly Fitness's ability to continue as a going concern for a reasonable period of time. This evaluation is part of the auditor's responsibilities when performing an audit in accordance with generally accepted auditing standards.
Management is required to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. These estimates and assumptions are a critical part of preparing financial statements according to generally accepted accounting principles. Actual results could differ from these estimates, which is a standard disclaimer due to the inherent uncertainty in forecasting future events and conditions.
For a prospective Fly Fitness franchisee, this means understanding that the financial statements are based on certain assumptions and estimates made by the company's management. While the auditor evaluates these, there is still a risk that actual results could vary. Therefore, it is prudent for a potential franchisee to carefully review these policies and estimates, possibly with the help of a financial advisor, to understand the potential impact on the financial health and stability of Fly Fitness.