In auditing Fly To Fit's financial statements, what risks must be identified and assessed?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
issued.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of 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 an audit 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.
In performing an audit in accordance with GAAS, 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\nerror, and design and perform audit procedures responsive to those risks. Such procedures include\nexamining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
924 W. 75th Street Suite 120 - 189 Naperville, IL 60565 +1 (815) 348-2421 omar@napercpa.com
- 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 the Company's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting\nestimates 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 To Fit's 2024 Franchise Disclosure Document, 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 involve examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor must exercise professional judgment and maintain professional skepticism throughout the audit.
The auditor's objectives are to obtain reasonable assurance that the financial statements are free of material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. However, reasonable assurance is not absolute, and there is a risk that a material misstatement may not be detected, especially one resulting from fraud, which may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if they could influence the judgment of a reasonable user of the financial statements.
Fly To Fit's management is responsible for the preparation and fair presentation of the financial statements, including the design, implementation, and maintenance of internal control relevant to the preparation of financial statements that are free of material misstatement, whether due to fraud or error. Management is also required to evaluate whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern for one year after the financial statements are issued. The auditor 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 and conclude whether there are conditions that raise substantial doubt about the company's ability to continue as a going concern.