What does the audit of Gokhale Method's financial statements aim to provide assurance about?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' 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 generally accepted auditing standards 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.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, the objective of the audit of the financial statements is to provide reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The audit also aims to issue an auditor's report that includes an opinion on the financial statements.
However, the FDD clarifies that reasonable assurance is not absolute and doesn't guarantee that all material misstatements will be detected. There's a higher risk of not detecting a material misstatement resulting from fraud compared to error, as fraud may involve more complex actions like collusion or forgery.
In conducting the audit, the auditors exercise professional judgment and maintain skepticism, assess the risks of material misstatement, examine evidence regarding amounts and disclosures, and evaluate the appropriateness of accounting policies and the reasonableness of significant estimates made by management. They also consider Gokhale Method's ability to continue as a going concern. Ultimately, the audit seeks to give stakeholders confidence in the accuracy and reliability of the financial statements presented by Gokhale Method.