What does the audit of The Standardx include in terms of evaluating accounting principles?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Source: Item 23 — Receipts (FDD pages 85–132)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the audit conducted by Deloitte & Touche LLP includes evaluating the accounting principles used by the company. The audit aims to provide reasonable assurance that the financial statements are free of material misstatement, whether due to error or fraud.
The auditors' procedures involve assessing the risks of material misstatement in the financial statements and performing procedures to respond to those risks. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. Additionally, the auditors evaluate significant estimates made by management and the overall presentation of the financial statements.
The audit also focuses on specific areas deemed as "Critical Audit Matters." For example, the audit addresses deferred revenue related to the loyalty program, which had a liability of $1,333 million as of December 31, 2024. The audit procedures include testing the effectiveness of the company's controls over the estimation of breakage assumption and developing independent estimates of the liability. Another critical audit matter is goodwill, where the company recognized $110 million of goodwill impairment charges. The audit procedures involve testing the effectiveness of the company's controls over management's goodwill impairment analyses and evaluating the reasonableness of management's projected future cash flows, discount rate, and capitalization rate.