During the audit, is professional judgment and professional skepticism required for Pearce Bespoke?
Pearce_Bespoke 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 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 Pearce Bespoke Franchising, 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 Pearce Bespoke Franchising, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, the auditor is required to exercise professional judgement and maintain professional skepticism throughout the audit. The auditor's responsibilities include obtaining reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. Reasonable assurance is defined as a high level of assurance, but it is not absolute, and there is no guarantee that an audit will always detect a material misstatement.
The auditor is also responsible for identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, and for 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. The auditor must obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
Furthermore, the auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements. They also conclude whether there are conditions or events that raise substantial doubt about Pearce Bespoke's ability to continue as a going concern for a reasonable period of time. The auditor is required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.