During the audit of Kidokinetics' financial statements, what judgment and skepticism level should the auditor maintain?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
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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\nerror, and design and perform audit procedures responsive to those risks. Such procedures include\nexamining, on a test basis, evidence 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 the Company's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting\nestimates made by management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics' 2024 Franchise Disclosure Document, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditor should have a questioning mind and critically assess the audit evidence.
The auditor's responsibilities include identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, and designing and performing audit procedures responsive to those risks. These procedures involve examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also needs to understand internal control relevant to the audit to design appropriate procedures, though not to express an opinion on the effectiveness of Kidokinetics' internal control.
Furthermore, the auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements. The auditor must also conclude whether there are conditions or events that raise substantial doubt about Kidokinetics' ability to continue as a going concern. These standards ensure that the auditor approaches the audit with due diligence and a critical perspective, providing a reasonable basis for their opinion on the financial statements.