When auditing Bojangles' financial statements, are auditors required to express an opinion on the effectiveness of the company's internal control?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with US GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the consolidated 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 consolidated 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 the Company'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 consolidated financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 22 — CONTRACTS (FDD page 82)
What This Means (2025 FDD)
According to Bojangles' 2025 Franchise Disclosure Document, the auditors are not required to express an opinion on the effectiveness of the company's internal control. While the auditors must obtain an understanding of internal control relevant to the audit to design appropriate procedures, the audit's purpose is not to provide an opinion on the effectiveness of Bojangles' internal control.
This means that the audit focuses on whether the financial statements are free from material misstatement, not on whether Bojangles' internal controls are effective. The auditors' responsibilities include exercising professional judgment, assessing the risks of material misstatement, examining evidence, evaluating accounting policies, and concluding whether there are conditions that raise doubt about the company's ability to continue as a going concern.
For a prospective franchisee, this indicates that the audit provides assurance on the accuracy of the financial statements but does not guarantee that Bojangles' internal controls are flawless. A potential franchisee should consider this when evaluating the financial health and stability of the company.
It is common in franchise systems for the franchisor's financial statements to be audited to provide assurance to potential franchisees. However, the scope of these audits can vary, and it's important to understand what the audit covers and what it does not. In this case, the audit provides assurance on the financial statements' accuracy but not on the effectiveness of internal controls.