Does the auditor express an opinion on the effectiveness of Bombs Away's internal control?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion. An audit also includes 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the auditor does not express an opinion on the effectiveness of the company's internal control. While the auditor considers internal control relevant to the entity's preparation and fair presentation of financial statements in order to design appropriate audit procedures, this consideration is not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. The auditor's responsibility is to express an opinion on the financial statements based on their audit, ensuring they are free from material misstatement.
This means that the audit focuses on the accuracy and reliability of the financial statements themselves, rather than the systems and processes Bombs Away has in place to ensure accurate financial reporting. The auditor's procedures include obtaining audit evidence about the amounts and disclosures in the financial statements, evaluating accounting policies, and assessing significant accounting estimates made by management.
For a prospective franchisee, this implies that the financial statements have been reviewed for accuracy, but there is no independent assessment of the quality of Bombs Away's internal controls over financial reporting. Therefore, while the financial statements may be reliable, potential franchisees may want to inquire separately about Bombs Away's internal controls and risk management practices to gain a more complete understanding of the company's financial health and stability.