Does the audit of Management Recruiters include an assessment of the third-party actuary's qualifications?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
Our audit procedures related to the evaluation of the reasonableness of the workers' compensation claim liability included the following, among others:
- We obtained an understanding of the process and evaluated the design and implementation of controls relating to management's determination of the workers' compensation claim liability.
- We assessed the professional qualifications of the third-party actuary including their independence, experience, and certifications.
- We obtained and reviewed the independent actuarial report and gained an understanding from the actuary of the objectives and scope of their work, and we evaluated the consistency of methods and assumptions used in the current year as compared to previous years.
- We discussed the valuation model, data inputs, assumptions, calculations, and results directly with the third-party actuary.
- We analytically considered balances in relation to prior years and activity that took place during the year.
- We tested the completeness, integrity, and accuracy of the underlying data used by the third-party actuary as part of the actuarial valuation, including confirmation of underlying data with third party data providers.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters's 2024 Franchise Disclosure Document, the audit procedures related to evaluating the reasonableness of the workers' compensation claim liability include assessing the qualifications of the third-party actuary. This assessment specifically covers the actuary's independence, experience, and certifications.
This indicates that the audit firm, in this case FORVIS, LLP, takes steps to ensure that the actuarial estimates used to determine the company's workers' compensation claims liability are based on sound and reliable information. By evaluating the actuary's qualifications, the auditors aim to increase the reliability of the financial statements. This is particularly important because the workers' compensation claims liability is based on estimated future costs, which involves significant assumptions and judgments.
For a prospective Management Recruiters franchisee, this aspect of the audit provides some assurance that the financial statements have been subjected to scrutiny regarding the estimation of liabilities. The audit also includes reviewing the actuarial report, understanding the actuary's objectives, and evaluating the consistency of methods and assumptions used. This comprehensive approach helps to ensure that the financial information presented is reasonably accurate and reliable, which is crucial for making informed business decisions.