When auditing Gold Star's consolidated financial statements, what level of judgment and skepticism is required?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
e 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 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 consolidated financial statements.
Board of Directors and Stockholders Gold Star Chili, Inc. Page 3
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 consolidated 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 consolidated 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 Gold Star Chili, Inc., its subsidiary, TCWW, LLC, and its consolidated entity, GSC Properties, LLC's internal control. Accordingly, no such opinion is\nexpressed.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the auditing firm Dean Dotton allen Ford, PLLC exercises professional judgment and maintains professional skepticism throughout the audit of Gold Star's consolidated financial statements. This means the auditors must critically assess the information provided by Gold Star and not simply accept it at face value. They must remain objective and question assumptions, looking for any potential misstatements or fraud. This approach is aligned with generally accepted auditing standards. The previous financial statements as of December 31, 2022, were audited by VonLehman & Company Inc., who merged with Dean Dorton Allen Ford, PLLC as of January 1, 2024.
The auditors' responsibilities include identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. They design and perform audit procedures responsive to those risks, which involve examining evidence regarding the amounts and disclosures in the consolidated financial statements on a test basis. The auditors also obtain an understanding of internal control relevant to the audit to design appropriate procedures, though they do not express an opinion on the effectiveness of Gold Star's internal control.
Furthermore, the auditors evaluate the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management. They also evaluate the overall presentation of the consolidated financial statements. The auditors must conclude whether there are conditions or events that raise substantial doubt about Gold Star's ability to continue as a going concern for a reasonable period of time. The auditing firm is required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.