What is the auditor's responsibility regarding the reasonableness of significant accounting estimates made by management for Hyper Kidz?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
here 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 GAAS, we:
sess CPA LLC
- 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,\nevidence 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 Boomerang Franchise, 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, the auditor has a responsibility to evaluate the reasonableness of significant accounting estimates made by the management of Boomerang Franchise, LLC, as well as to evaluate the overall presentation of the financial statements. This evaluation is part of the audit procedures conducted in accordance with auditing standards generally accepted in the United States of America (GAAS). The auditor's objective is 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.
In practical terms, this means the auditor, Rosse CPA LLC, will review the assumptions, data, and methods used by Hyper Kidz's management to arrive at accounting estimates. These estimates might include things like the useful lives of assets, provisions for doubtful accounts, or the fair value of certain liabilities. The auditor will assess whether these estimates are supportable and consistent with accounting principles.
It is important to note that while the auditor provides reasonable assurance, it is not an absolute guarantee of accuracy. The auditor's assessment is based on their professional judgment and the audit evidence available. Prospective Hyper Kidz franchisees should understand that the financial statements have been audited, but this does not eliminate all risks of financial misstatement. The auditor's report, dated March 23, 2024, is included in the FDD, offering an opinion on the fair presentation of Hyper Kidz's financial position.