During an audit, what must be evaluated regarding the accounting policies used by Hawaiian Bros Island Grill?
Hawaiian_Bros_Island_Grill 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 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 Hawaiian Bros Franchising, LLC'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 Hawaiian Bros Franchising, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 23 — RECEIPTS (FDD pages 77–262)
What This Means (2025 FDD)
According to the 2025 Hawaiian Bros Island Grill FDD, during an audit, the appropriateness of the accounting policies used must be evaluated. Additionally, the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements, must be assessed. This evaluation is part of performing an audit in accordance with Generally Accepted Auditing Standards (GAAS).
This means that a prospective Hawaiian Bros Island Grill franchisee should be aware that the franchisor's financial statements and accounting practices will be scrutinized by independent auditors. The auditors will assess whether the accounting methods used are suitable and whether the financial statements accurately reflect the company's financial position. This process aims to provide assurance that the financial information is reliable and transparent.
Furthermore, the audit also seeks to identify any risks of material misstatement in the financial statements, whether due to fraud or error. The auditors will examine evidence supporting the amounts and disclosures in the financial statements on a test basis. They will also gain an understanding of internal controls relevant to the audit, although the audit will not express an opinion on the effectiveness of Hawaiian Bros Island Grill's internal control system.
In summary, the audit process is designed to ensure the integrity and reliability of Hawaiian Bros Island Grill's financial reporting, which is a standard practice in franchising to maintain transparency and trust between the franchisor and its franchisees.