What must auditors do regarding the risks of material misstatement of Remax's consolidated financial statements?
Remax 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 consolidated 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 consolidated 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 the Company'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 consolidated financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company'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 22 — Contracts (FDD pages 108–334)
What This Means (2025 FDD)
According to Remax's 2025 Franchise Disclosure Document, when performing an audit in accordance with Generally Accepted Auditing Standards (GAAS), auditors must identify and assess the risks of material misstatement in the consolidated financial statements, whether these misstatements are due to fraud or error. They must also design and perform audit procedures that are responsive to these identified risks. These procedures include examining evidence related to the amounts and disclosures within the financial statements on a test basis.
Furthermore, the auditors are required to obtain an understanding of internal control relevant to the audit. This understanding is used to design audit procedures appropriate for the circumstances, but it is explicitly not for the purpose of expressing an opinion on the effectiveness of Remax's internal control. The auditors must also evaluate the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by the management, as well as the overall presentation of the financial statements.
Finally, the auditors must conclude whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about Remax's ability to continue as a going concern for a reasonable period of time. The auditors are also obligated 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.