What is the auditor's responsibility regarding professional judgment and skepticism during the audit of Hydrodog?

According to Hydrodog's 2025 Franchise Disclosure Document, the auditor has specific responsibilities regarding professional judgment and skepticism. During the audit of Hydrodog's financial statements, the auditor is required to exercise professional judgment and maintain professional skepticism throughout the entire audit process. This involves a critical assessment of the information provided and a questioning mind to identify potential misstatements, whether due to fraud or error.

The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement. However, this assurance is not absolute, and there is 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 must design and perform audit procedures that are responsive to the identified risks of material misstatement.

In practical terms, this means the auditor must independently evaluate the accounting policies used by Hydrodog, assess the reasonableness of significant accounting estimates made by management, and evaluate the overall presentation of the financial statements. The auditor must also consider whether there are any conditions or events that raise substantial doubt about Hydrodog's ability to continue as a going concern. These responsibilities ensure that the audit is conducted with integrity and objectivity, providing a reliable basis for stakeholders to make informed decisions based on Hydrodog's financial statements.