What is the auditor's responsibility regarding the reasonableness of significant accounting estimates made by Healthsource Chiropractic's management?
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 a responsibility to evaluate the reasonableness of significant accounting estimates made by the company's management. This evaluation is part of the broader audit process, which aims to provide reasonable assurance that the financial statements are free from material misstatement. The auditor's objective is to issue a report that includes their opinion on the financial statements.
To fulfill this responsibility, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. They identify and assess the risks of material misstatement, whether due to fraud or error, and design audit procedures responsive to those risks. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also obtains an understanding of internal control relevant to the audit to design appropriate audit procedures.
In addition to evaluating accounting estimates, the auditor also assesses the appropriateness of the accounting policies used and evaluates 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. The auditor is required to communicate with those charged with governance regarding the scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.