What is the auditor's responsibility regarding internal controls when auditing Bath Tune Up?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 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 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.
- 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.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 51–52)
What This Means (2025 FDD)
According to Bath Tune Up's 2025 Franchise Disclosure Document, the auditor's responsibility regarding internal controls is to obtain an understanding of internal control relevant to the audit. This understanding is used to design audit procedures that are appropriate in the circumstances. However, the audit is not performed for the purpose of expressing an opinion on the effectiveness of Bath Tune Up's internal control, and accordingly, no such opinion is expressed.
The auditor's procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements.
It is management's responsibility to design, implement, and maintain internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. The auditor's responsibility is to 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.
This means that while the auditor reviews Bath Tune Up's internal controls to plan the audit, they do not provide an independent assessment or guarantee of how effective those controls are. A prospective franchisee should be aware that the financial statements have been audited, but the audit does not certify the internal controls' effectiveness.