What does the auditor exercise throughout the audit of Sonesta Simply Suites' financial statements?
Sonesta_Simply_Suites 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 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 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 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, the auditor exercises professional judgment and maintains professional skepticism throughout the audit of the company's financial statements. This means the auditor approaches the audit with a questioning mind and critically assesses the information provided by management. They do not simply accept the information at face value but instead, evaluate the evidence to form their own independent opinion. This is a standard practice in auditing to ensure the accuracy and reliability of financial statements.
In addition to professional judgment and skepticism, the auditor also identifies and assesses the risks of material misstatement of the financial statements, whether due to fraud or error. They design and perform audit procedures responsive to those risks, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis. This involves selecting a sample of transactions and balances to verify their accuracy and completeness. The auditor also obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
However, the auditor's procedures are not for the purpose of expressing an opinion on the effectiveness of the company's internal control, and accordingly, no such opinion is expressed. The auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluates the overall presentation of the financial statements. Finally, the auditor concludes whether, in their judgment, there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern for a reasonable period of time.
These procedures are aligned with generally accepted auditing standards (GAAS) and are intended to provide reasonable assurance that the financial statements are free from material misstatement. The auditor is also 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. This communication helps to ensure that the audit is conducted effectively and that any issues are addressed in a timely manner.