What is the auditor's responsibility regarding accounting policies used by Punch King Fitness?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
In performing an audit in accordance with generally accepted auditing standards, 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 Punch King Fitness, Inc.'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.
Source: Item 22 — CONTRACTS (FDD pages 56–215)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, the auditor has a responsibility to evaluate the appropriateness of the accounting policies used by the company. This evaluation also extends to the reasonableness of significant accounting estimates made by the management team. Furthermore, the auditor is responsible for evaluating the overall presentation of the financial statements.
In fulfilling these responsibilities, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit process. The auditor's objective is to obtain 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 on the financial statements.
It is important to note that while the auditor assesses the internal controls of Punch King Fitness, they do so to design appropriate audit procedures, not to express an opinion on the effectiveness of the company's internal control system. Therefore, the auditor's report will not include any opinion on the effectiveness of Punch King Fitness's internal controls.