What must the auditor understand regarding internal controls relevant to the audit of Beggars Pizza?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted auditing standards, 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 Beggars Pizza Franchise, LLC'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 Beggars Pizza Franchise, LLC's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, the auditor must obtain an understanding of internal controls relevant to the audit to design appropriate audit procedures, but not to express an opinion on the effectiveness of Beggars Pizza's internal control. The document explicitly states that no such opinion is expressed.
The auditor's responsibilities include identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error. They design and perform audit procedures responsive to those risks, including examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also evaluates the appropriateness of accounting policies used, the reasonableness of significant accounting estimates made by management, and the overall presentation of the financial statements.
The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. However, reasonable assurance is not absolute, and there is a risk that a material misstatement may not be detected, especially if it results from fraud involving collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
The auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures transparency and provides an opportunity for those charged with governance to address any concerns or weaknesses in internal controls.