What is the auditor's responsibility regarding the implementation of internal controls at Premium Service Brands, LLC, the parent company of 360 Painting?

According to 360 Painting's 2025 Franchise Disclosure Document, the auditor's responsibility regarding internal controls at Premium Service Brands, LLC, is explicitly limited. The auditors obtain an understanding of internal control relevant to the audit to design appropriate audit procedures, but this is not for the purpose of expressing an opinion on the effectiveness of Premium Service Brands, LLC's internal control. The document clearly states that no such opinion is expressed.

This means that while the auditors will assess internal controls to the extent necessary to conduct a thorough audit of the financial statements, they are not responsible for evaluating or ensuring the overall effectiveness of these controls. Their focus is on whether the financial statements are free from material misstatement, whether due to fraud or error. The auditors' procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis.

For a prospective 360 Painting franchisee, this distinction is important because it clarifies the scope of the audit. While the financial statements are audited, there is no independent assessment of the strength or weakness of the internal controls at Premium Service Brands, LLC. Therefore, franchisees should not assume that the audit provides assurance about the operational efficiency or reliability of the company's internal control systems. Instead, the audit primarily addresses the accuracy and fairness of the financial reporting.

It is also important to note that management is responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements. The auditor's role is to evaluate the appropriateness of accounting policies and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements.