Does the audit of Auntie Annes' financial statements include expressing an opinion on the effectiveness of the company's internal control?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
In performing an audit in accordance with US GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the consolidated 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's internal control. Accordingly, no such opinion is expressed.
Source: Item 23 — RECEIPTS (FDD pages 106–366)
What This Means (2024 FDD)
According to Auntie Annes' 2024 Franchise Disclosure Document, the audit of the company's financial statements does not include expressing an opinion on the effectiveness of internal control. The auditor's responsibilities include obtaining an understanding of internal control relevant to the audit to design appropriate procedures, but not for the purpose of expressing an opinion on its effectiveness. Therefore, the audit report will not contain an opinion on the effectiveness of Auntie Annes' internal controls.
This means that while the auditors consider internal controls in their audit process, they do not provide a separate assessment or guarantee about how well those controls function. A prospective franchisee should understand that the financial statements are audited for accuracy and fair presentation, but the audit does not specifically evaluate the systems and procedures Auntie Annes has in place to manage its business operations and financial reporting.
It is common practice for auditors of financial statements to focus on providing an opinion on the fairness of the financial statements themselves, rather than on the effectiveness of internal controls. However, prospective franchisees may want to inquire with Auntie Annes about any internal control assessments or reports that the company may have obtained separately, as this could provide additional insight into the company's risk management practices.