Does the audit of Benihana's financial statements provide assurance about internal controls?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to the 2024 FDD, the audit of Benihana's financial statements by Plante & Moran PLLC from 2018 to 2021 does not provide assurance regarding internal controls over financial reporting. While the audit aims to ensure the financial statements are free from material misstatement, it does not extend to expressing an opinion on the effectiveness of the company's internal controls. The independent auditor's responsibility is to express an opinion on the financial statements themselves. As part of the audit, the auditor is required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, no such opinion is expressed.
However, for the years 2022 and 2023, Deloitte & Touche LLP audited the internal control over financial reporting of The ONE Group Hospitality, Inc. and subsidiaries. In 2022, they expressed an opinion that the company maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control— Integrated Framework (2013) issued by COSO. In 2023, they expressed an opinion that the company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control— Integrated Framework (2013) issued by COSO.
For a potential Benihana franchisee, this means that the audit of the financial statements alone should not be relied upon as an indicator of the strength of Benihana's internal controls. While the financial statements themselves are audited for accuracy, a separate audit specifically addresses internal controls. A prospective franchisee may want to inquire about the findings of any separate internal control audits to gain a more complete picture of the company's financial management practices. Understanding the effectiveness of Benihana's internal controls can help a franchisee assess the risk associated with the financial reporting of the company.