What criteria did Benihana's management use to assess the effectiveness of its internal control over financial reporting as of December 31, 2023?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making its assessment of internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations (the "COSO") of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this assessment, our CEO and CFO concluded that our internal control over financial reporting was effective as of December 31, 2023.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the management assessed the effectiveness of its internal control over financial reporting as of December 31, 2023, using criteria established by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this assessment, Benihana's CEO and CFO concluded that the company's internal control over financial reporting was effective as of the same date.
Internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting for external purposes, in accordance with accounting principles generally accepted in the United States of America. This includes maintaining records that accurately reflect transactions, ensuring transactions are recorded as necessary for financial statement preparation, providing assurance that receipts and expenditures are made with management authorization, and providing reasonable assurance that unauthorized use of company assets that could materially affect the financial statements is prevented or detected in a timely manner.
However, due to its inherent limitations, internal control over financial reporting cannot provide absolute assurance that misstatements will be prevented or detected. An independent registered public accounting firm, Deloitte & Touche LLP, also audited the financial statements and issued an attestation report on Benihana's internal control over financial reporting as of December 31, 2023.
For a prospective Benihana franchisee, this indicates that the company's financial reporting is subject to scrutiny and is expected to adhere to standard accounting practices. While it does not guarantee error-free financials, it suggests that Benihana has established processes to ensure the reliability of its financial data.