When evaluating Hardees' financial statements, what must the auditor conclude regarding the appropriateness of accounting policies and the reasonableness of significant accounting estimates made by management?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
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 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 ingly, 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 consolidated financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, the auditor is required to evaluate the appropriateness of the accounting policies used by Hardees' management and the reasonableness of significant accounting estimates made by them. This evaluation is a key step in performing an audit in accordance with Generally Accepted Auditing Standards (GAAS). The auditor must also evaluate the overall presentation of the consolidated financial statements.
To achieve this, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. They need to 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. These procedures include examining evidence regarding the amounts and disclosures in the consolidated financial statements on a test basis.
Furthermore, the auditor has to obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. The auditor will conclude whether, in their judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Hardees' ability to continue as a going concern for a reasonable period of time. The auditor is also 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.