What is the responsibility of Benihana's management regarding internal control over financial reporting, according to the basis for opinion?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, specifically the 'Basis for Opinion' section regarding internal control over financial reporting, the company's management is responsible for two key aspects. First, they are responsible for maintaining effective internal control over financial reporting. Second, they are responsible for assessing the effectiveness of these internal controls, which is included in the 'Report of Management on Internal Control over Financial Reporting.'
This means Benihana's management must establish and uphold internal controls that ensure the reliability of the company's financial reporting. These controls are designed to provide reasonable assurance that financial statements are prepared accurately and in accordance with generally accepted accounting principles. The management's assessment involves evaluating how well these controls are working to prevent or detect potential misstatements in the financial reports.
For a prospective Benihana franchisee, this indicates that the franchisor places importance on accurate and reliable financial reporting. The presence of a management report on internal controls and an auditor's opinion suggests that Benihana is committed to maintaining a transparent and well-governed financial system. This can be reassuring for franchisees, as it implies that the franchisor's financial performance is closely monitored and that potential financial risks are being actively managed.
It's important to note that while management is responsible for these controls, an independent registered public accounting firm also audits these controls and provides their own opinion. This independent audit adds another layer of assurance regarding the reliability of Benihana's financial reporting. The franchisee should review the reports and opinions from both management and the auditor to gain a comprehensive understanding of the company's internal control environment.