What should the auditors conclude regarding Monicals Pizza's ability to continue as a going concern?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the consolidated 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, evidence regarding the amounts and disclosures in the consolidated 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 estimates made by management, as well as evaluate the overall presentation of the consolidated 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.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings and certain internal control-related matters that we identified during the audit.
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, the independent auditor is required to evaluate conditions or events that could raise substantial doubt about the company's ability to continue as a going concern. This evaluation is a standard part of the audit process, ensuring that the financial statements provide a fair and accurate representation of the company's financial position. The auditor's responsibility includes exercising professional judgment and maintaining professional skepticism throughout the audit to identify potential risks.
The auditor must assess the risks of material misstatement in the consolidated financial statements, whether due to fraud or error, and design audit procedures to address those risks. These procedures involve examining evidence related to the amounts and disclosures in the financial statements on a test basis. Additionally, the auditor needs to understand the company's internal control system to design appropriate audit procedures, although the audit does not aim to express an opinion on the effectiveness of the internal control itself.
Furthermore, the auditor evaluates the appropriateness of the accounting policies used by Monicals Pizza and the reasonableness of significant accounting estimates made by management. The auditor's report explicitly states whether the consolidated financial statements present fairly the financial position, results of operations, and cash flows of the company in accordance with accounting principles generally accepted in the United States of America. The auditor is also required to communicate significant audit findings and internal control-related matters to those charged with governance.