Under what condition are misstatements considered material in Pearce Bespoke's financial statements?

According to Pearce Bespoke's 2025 Franchise Disclosure Document, misstatements are considered material if there is a substantial likelihood that they would influence the judgment of a reasonable user of the financial statements, whether considered individually or in the aggregate. This definition is used by the independent auditor when evaluating the fairness and accuracy of Pearce Bespoke's financial statements. The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error.

For a prospective Pearce Bespoke franchisee, this means that the financial statements provided in Item 21 of the FDD are prepared and audited with the goal of ensuring they are free from errors that could significantly impact a potential investor's decision-making. The auditor's report expresses an opinion on whether the financial statements present fairly the financial position, results of operations, and cash flows of Pearce Bespoke in accordance with generally accepted accounting principles.

It is important to note that while the auditor aims to detect material misstatements, reasonable assurance is not absolute, and there is always a risk that some misstatements may go undetected, especially those resulting from fraud. Therefore, a potential franchisee should carefully review the financial statements and consider seeking independent financial advice to fully understand the financial health and stability of Pearce Bespoke.