Does the audit performed express an opinion on the effectiveness of Basecamp Fitness's internal control?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
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 consolidated 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
Source: Item 23 — RECEIPTS (FDD pages 62–248)
What This Means (2025 FDD)
According to the 2025 FDD, the audit report for Anytime Fitness, LLC, which is affiliated with Basecamp Fitness, does not express an opinion on the effectiveness of the company's internal control. The report outlines the auditor's responsibilities, which include obtaining an understanding of internal control relevant to the audit to design appropriate procedures, but explicitly states that this is not for the purpose of expressing an opinion on the effectiveness of the company's internal control.
Similarly, the audit report for SEB Franchising Guarantor LLC, another affiliate, also does not express an opinion on the effectiveness of internal control. The responsibilities of management include the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements. However, the auditor's responsibility is to understand internal control to design appropriate audit procedures, not to provide an opinion on its effectiveness.
For a prospective Basecamp Fitness franchisee, this means the audit focuses on the accuracy and reliability of the financial statements rather than the strength of the company's internal controls. While the auditors consider internal controls to design their audit, they do not provide an independent assessment of how well those controls function. This is a common practice, as a full audit of internal controls is a more extensive and costly process. Franchisees may want to inquire separately about any internal control assessments the company has performed or any known weaknesses in their financial reporting processes.