What are the objectives of the auditor in auditing the financial statements for Southern Steer?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting in error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individual or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
- Exercise professional judgement 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 Southern Steer Franchising International, LLC's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made my management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgement, there are conditions or events, considered in the aggregate, that raise substantial doubt about Southern Steer Franchising International, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 5 — and 7 of the FDD, Section 3.1 of the Franchise Agreement and Section 4.1 of the Multi-Unit Development Agreement are hereby amended to state that payment of the initial franchise fee and development fee will be deferred until We have satisfied Our pre-opening obligations, and You have commenced business operations. (FDD pages 168–290)
What This Means (2025 FDD)
According to the 2025 FDD, the auditor's objectives in auditing Southern Steer's financial statements are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error. The auditor also aims to issue a report that includes their opinion on the financial statements. It's important to note that while reasonable assurance is a high level of assurance, it is not absolute, and there is no guarantee that an audit conducted according to GAAS will always detect a material misstatement. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error.
To achieve these objectives, the auditor will exercise professional judgment and maintain professional skepticism throughout the audit. They will 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. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
The auditor will also obtain 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 responsibility does not extend to expressing an opinion on the effectiveness of Southern Steer's internal control. The auditor will 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.
Finally, the auditor will conclude whether, in their judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Southern Steer's ability to continue as a going concern for a reasonable period of time. These objectives and procedures are in line with generally accepted auditing standards (GAAS) and aim to provide an independent opinion on the fairness of Southern Steer's financial statements.