Does the audit of Angry Chickz Franchising, LLC's financial statements include obtaining an understanding of internal control to design appropriate audit procedures?
Angry_Chickz Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with GAAS, we:
- x Exercise professional judgment and maintain professional skepticism throughout the audit.
- x 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.
- x 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 Angry Chickz Franchising, LLC's internal control. Accordingly, no such opinion is expressed.
- x 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.
- x Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Angry Chickz Franchising, LLC's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
According to Angry Chickz's 2025 Franchise Disclosure Document, the audit of the company's financial statements does include obtaining an understanding of internal control to design appropriate audit procedures. The auditor's responsibilities include identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, and designing and performing audit procedures responsive to those risks. As part of this process, the auditor obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. However, the audit is not for the purpose of expressing an opinion on the effectiveness of Angry Chickz's internal control, and no such opinion is expressed.
This means that while the auditor does evaluate Angry Chickz's internal controls to plan the audit, they do not provide a separate assessment or guarantee of the effectiveness of those controls. The auditor's focus is on ensuring the financial statements are free from material misstatement. The auditor's procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
For a prospective franchisee, this indicates that Angry Chickz undergoes a thorough financial audit that considers internal controls. However, it's important to recognize that the audit's objective is not to certify the strength of these controls, but rather to ensure the accuracy of the financial statements. Franchisees should consider this when evaluating the financial stability and practices of Angry Chickz.