When evaluating Fly Fitness Franchise LLC'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 company's financial statements, the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management must be evaluated. This evaluation is part of an audit performed under generally accepted auditing standards. The auditor must exercise professional judgment and maintain professional skepticism throughout the audit.
Management is responsible for preparing financial statements in accordance with generally accepted accounting principles. This includes designing, implementing, and maintaining internal controls relevant to preparing and fairly presenting financial statements free from material misstatement, whether due to fraud or error. Management must also evaluate whether conditions or events, considered in the aggregate, raise substantial doubt about Fly Fitness's ability to continue as a going concern within one year after the date the financial statements are available to be issued.
Furthermore, the auditor's responsibilities include identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, and designing and performing audit procedures responsive to those risks. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor must also obtain an understanding of internal control relevant to the audit to design appropriate audit procedures, though not for expressing an opinion on the effectiveness of Fly Fitness's internal control.