Does the auditor express an opinion on the effectiveness of Better Blend's internal control?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
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Auditor's Responsibility for the Audit of the Financial Statement
Our objectives are to obtain reasonable assurance about whether the financial statement as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS, we:
- · Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statement, whether due to fraud or error, and design and perform audit procedures responsive to those risks.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 43)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, the independent auditor does not express an opinion on the effectiveness of the company's internal control. While the auditor obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, this understanding is not for the purpose of expressing an opinion on the effectiveness of Better Blend's internal control.
This means that the auditor's report focuses solely on the fair presentation of the financial statements, and does not provide any assurance about the quality or effectiveness of Better Blend's internal controls over financial reporting. Internal controls are processes designed and implemented by management to provide reasonable assurance regarding the reliability of financial reporting.
Prospective franchisees should be aware that the absence of an auditor's opinion on internal controls does not necessarily indicate a problem. However, it does mean that an independent assessment of these controls is not included in the FDD. A franchisee may want to perform their own due diligence into Better Blend's financial processes and controls.