What is the auditor's responsibility regarding the identification of the risks of material misstatement of the financial statements for Gokhale Method?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
In performing an audit in accordance 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 effectiveness of Gokhale Method Institute, Inc.'s internal control. Accordingly, no such opinion is expressed.
- 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.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Gokhale Method Institute, Inc.'s ability to continue as a going concern for a reasonable period of time.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, the auditor has specific responsibilities regarding the identification and assessment of risks related to potential misstatements in the company's financial statements. These responsibilities are part of conducting an audit in accordance with generally accepted auditing standards. The auditor's objectives are to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion.
The auditor is required to identify and assess the risks of material misstatement in the financial statements, whether these misstatements arise from fraud or error. To address these risks, the auditor must design and perform audit procedures that are responsive to the assessed risks. These procedures involve examining evidence, on a test basis, related to the amounts and disclosures within the financial statements.
It is important to note that while the auditor must obtain an understanding of internal controls, it is solely for the purpose of designing appropriate audit procedures. The auditor does not express an opinion on the effectiveness of Gokhale Method's internal control systems. Additionally, the auditor evaluates the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements. The auditor also has a responsibility to conclude whether there is substantial doubt about Gokhale Method's ability to continue as a going concern.