Do the auditors express an opinion on the effectiveness of 1 800 Packouts' internal control?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted auditing standards, 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'sinternal 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.
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 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to 1 800 Packouts' 2025 Franchise Disclosure Document, the auditors do not express an opinion on the effectiveness of the company's internal control. While the auditors obtain an understanding of internal control relevant to the audit to design appropriate audit procedures, this is explicitly not for the purpose of expressing an opinion on the effectiveness of 1 800 Packouts' internal control. The audit focuses on the financial statements themselves, not the internal controls that produce them. The auditors' responsibilities include exercising professional judgment, assessing risks of material misstatement, and evaluating accounting policies. They also determine if there are conditions that raise doubt about the company's ability to continue as a going concern.
This means that the audit is designed to provide reasonable assurance that the financial statements are free from material misstatement, but it does not assess the strength or effectiveness of the company's internal controls. A prospective franchisee should understand that the financial statements have been audited, but the audit does not provide any assurance about the quality of the company's internal control systems.
This is a fairly standard practice in financial auditing. Auditors are primarily concerned with the accuracy and reliability of the financial statements, and while they must understand internal controls to assess the risk of misstatement, they are not required to provide an opinion on those controls. A prospective franchisee who is concerned about the company's internal controls may want to conduct their own due diligence or seek the advice of a financial professional.