What are auditors required to exercise throughout the audit 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.
Source: Item 22 — Contracts (FDD pages 108–334)
What This Means (2025 FDD)
According to Remax's 2025 Franchise Disclosure Document, auditors performing an audit in accordance with Generally Accepted Auditing Standards (GAAS) are required to exercise professional judgment and maintain professional skepticism throughout the audit. This means the auditors must approach the audit with a questioning mind and critically assess the information provided by Remax. They should not automatically assume that the information is correct but should instead seek to verify it through independent testing and corroboration.
In addition to professional judgment and skepticism, the auditors must identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. This involves understanding Remax's internal controls and designing audit procedures to address the identified risks. The auditors will examine evidence regarding the amounts and disclosures in the financial statements on a test basis, meaning they will not review every transaction but will select a sample of transactions to examine in detail.
The auditors are also required to 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. Finally, the auditors must conclude whether there are conditions or events that raise substantial doubt about Remax's ability to continue as a going concern for a reasonable period of time. These procedures are in place to ensure the accuracy and reliability of Remax's financial statements.
Overall, these requirements ensure that the audit is conducted with due diligence and that the financial statements provide a fair and accurate representation of Remax's financial position and results of operations. This is important for prospective franchisees as it gives them confidence in the financial information provided by Remax and helps them make informed decisions about investing in a franchise.