What is the auditor's objective in auditing Healthsource Chiropractic's financial statements?
Healthsource_Chiropractic Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue 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 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's primary objective is to provide reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. This assurance allows the auditor to issue a report that includes their professional opinion on the fairness and accuracy of the financial statements. The auditor's report includes balance sheets as of December 31, 2024, 2023, and 2022, and the related statements of income and comprehensive income, members' and stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements.
The FDD emphasizes that while reasonable assurance is a high level of confidence, it is not an absolute guarantee. There's always a risk that a material misstatement may not be detected, especially if it results from fraud involving collusion, forgery, or intentional omissions. The auditor's assessment of materiality considers whether misstatements, individually or in the aggregate, would likely influence the judgment of a reasonable user of the financial statements.
To achieve their objective, the auditor follows generally accepted auditing standards, exercising professional judgment and maintaining skepticism throughout the audit. This involves identifying and assessing the risks of material misstatement, obtaining an understanding of internal controls, and evaluating the appropriateness of accounting policies and the reasonableness of management's estimates. The auditor also evaluates whether there are conditions that raise substantial doubt about Healthsource Chiropractic's ability to continue as a going concern.
The auditor is required to communicate important matters to those charged with governance, including the planned scope and timing of the audit, significant findings, and internal control-related issues identified during the audit. However, the auditor does not express an opinion on the effectiveness of Healthsource Chiropractic's internal control.