What is the auditor required to evaluate regarding the accounting policies used by Kidokinetics?
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 is responsible for evaluating the appropriateness of the accounting policies used by the company. This evaluation is part of a broader audit process aimed at providing reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The auditor's objective is to issue a report that includes their opinion on the financial statements.
To achieve this, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. They identify and assess the risks of material misstatement in the financial statements, designing and performing audit procedures responsive to those risks. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
Furthermore, the auditor obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, though they do not express an opinion on the effectiveness of Kidokinetics' internal control. In addition to evaluating accounting policies, the auditor also assesses the reasonableness of significant accounting estimates made by management and evaluates the overall presentation of the financial statements. Finally, the auditor must conclude whether there are conditions or events that raise substantial doubt about Kidokinetics' ability to continue as a going concern.
This comprehensive evaluation ensures that the financial statements provide a fair and accurate representation of Kidokinetics' financial position, results of operations, and cash flows, in accordance with generally accepted accounting principles. For a prospective franchisee, this rigorous audit process provides confidence in the financial information presented in the FDD.