Is the audit of Black Bear Diner intended to express an opinion on the effectiveness of internal controls?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
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 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 BBDI 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 BBDI 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 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to the 2025 FDD, the audit of Black Bear Diner's financial statements is not performed to express an opinion on the effectiveness of its internal control. The audit's primary objective is to design audit procedures appropriate for the circumstances, but not to evaluate or provide assurance on the company's internal controls. The auditor's responsibilities include identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error. They also examine evidence regarding the amounts and disclosures in the financial statements on a test basis.
During the audit, the auditors obtain an understanding of internal control relevant to the audit. However, this understanding is solely for the purpose of designing appropriate audit procedures and not for expressing an opinion on the effectiveness of Black Bear Diner's internal control. The audit also involves evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
The auditor's report will 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 is a standard part of the audit process, ensuring transparency and informing management and those charged with governance about the key aspects of the audit and any significant findings related to internal control.