What is the auditor's objective when auditing Mr. Sandless' financial statements?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these financialstatements.
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 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 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 Mr. Sandless 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.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Mr. Sandless Franchise, LLC'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 21 — FINANCIAL STATEMENTS (FDD pages 41–42)
What This Means (2025 FDD)
According to Mr. Sandless' 2025 Franchise Disclosure Document, the auditor's primary objective is to gain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. This includes issuing an auditor's report that expresses an opinion on the fairness and accuracy of the financial statements. While the auditor aims for a high level of assurance, it is not an absolute guarantee that all misstatements will be detected. The auditor's responsibility also involves exercising professional judgment and maintaining skepticism throughout the audit process.
The auditor's responsibilities include identifying and assessing the risks of material misstatement in Mr. Sandless' financial statements, whether due to fraud or error. To address these risks, the auditor designs and performs audit procedures, such as examining evidence related to the amounts and disclosures in the financial statements on a test basis. Additionally, the auditor seeks to understand the internal controls relevant to the audit, enabling them to create appropriate audit procedures. However, the auditor's role does not extend to expressing an opinion on the effectiveness of Mr. Sandless' internal control systems.
Furthermore, the auditor evaluates the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by Mr. Sandless' management. They also assess the overall presentation of the financial statements. The auditor must determine if there are conditions or events that raise substantial doubt about Mr. Sandless' ability to continue as a going concern. The auditor is required to communicate with those in charge of governance regarding the scope and timing of the audit, significant findings, and any internal control-related issues identified during the audit.