What is the auditor required to do regarding the amounts and disclosures in Healthsource Chiropractic's financial statements?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
ditor'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 financial statements.
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.
Source: Item 23 — Receipts (FDD pages 77–282)
What This Means (2025 FDD)
According to Healthsource Chiropractic's 2025 Franchise Disclosure Document, the auditor has several responsibilities related to the financial statements. 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. While reasonable assurance is a high level of assurance, it is not absolute, and there is no guarantee that an audit will always detect a material misstatement. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error. Misstatements are considered material if they would likely influence the judgment of a reasonable user of the financial statements.
In conducting the audit, the auditor must exercise professional judgment and maintain professional skepticism. This includes identifying and assessing the risks of material misstatement, whether due to fraud or error, and designing and performing audit procedures responsive to those risks. As part of these procedures, the auditor will examine evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also needs to obtain an understanding of internal control relevant to the audit in order to design appropriate audit procedures, but not to express an opinion on the effectiveness of HealthSource Chiropractic's internal control.
The auditor is also required to evaluate the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements. Furthermore, the auditor must conclude whether there are conditions or events that raise substantial doubt about HealthSource Chiropractic's ability to continue as a going concern for a reasonable period of time. Finally, the auditor 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.
For a prospective Healthsource Chiropractic franchisee, this indicates that the financial statements have been examined by an independent party who has assessed their fairness and reliability. While the audit provides a level of assurance, it is important to remember that it is not a guarantee of accuracy, and the auditor's opinion is based on the information available at the time of the audit. Franchisees should carefully review the financial statements and the auditor's report, and consult with their own financial advisors to fully understand the financial health of Healthsource Chiropractic.