How are misstatements defined in the context of the audit of Mr. Sandless' financial statements?

According to Mr. Sandless' 2025 Franchise Disclosure Document, misstatements are considered material if they could reasonably be expected to influence the economic decisions of users relying on the financial statements, whether these misstatements occur individually or in the aggregate. This definition is crucial because it sets the threshold for what the auditor must focus on during the audit process.

For a prospective Mr. Sandless franchisee, this means that the financial statements presented in the FDD are audited with the aim of ensuring they are free from errors that could significantly impact your investment decisions. The auditor's responsibility is to provide reasonable assurance that the financial statements give a fair view of Mr. Sandless' financial position. However, it's important to note that this is not an absolute guarantee, as some misstatements, especially those resulting from fraud, may not always be detected.

Therefore, while the audit aims to detect material misstatements, franchisees should still exercise their own due diligence when reviewing the financial statements. Understanding this definition helps a potential franchisee appreciate the scope and limitations of the audit, encouraging them to seek additional professional advice if needed to fully assess the financial health of Mr. Sandless.