Does the auditor express an opinion on the effectiveness of Afuri Ramen Dumpling's internal control?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to the 2024 Afuri Ramen Dumpling FDD, the auditor's report explicitly states that their audit does not include expressing an opinion on the effectiveness of the company's internal control. Instead, the auditor's responsibility is to express an opinion on the financial statements based on their audit, ensuring they are free from material misstatement. The auditor's consideration of internal control is limited to designing audit procedures appropriate for the circumstances, not for the purpose of expressing a separate opinion on its effectiveness.
This means that while the auditor assesses Afuri Ramen Dumpling's internal controls to plan the audit, they do not provide an independent assessment or guarantee of how well those controls function. The management of Afuri Ramen Dumpling is responsible for designing, implementing, and maintaining internal controls relevant to the preparation and fair presentation of financial statements.
For a prospective franchisee, this highlights the importance of understanding that the financial statements have been audited for accuracy and fairness in their presentation, but the effectiveness of the company's internal controls is not independently verified by the auditor. Therefore, potential franchisees may want to conduct their own due diligence regarding Afuri Ramen Dumpling's internal controls and business practices.