How does the auditor obtain an understanding of internal control relevant to the audit of Bombs Away?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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 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 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the auditor obtains an understanding of internal control relevant to the audit to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. As such, the auditor expresses no opinion on the effectiveness of Bombs Away's internal controls.
The audit procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor's responsibility is to express an opinion on the financial statements based on their audit, which is conducted in accordance with auditing standards generally accepted in the United States of America. These standards require the auditor to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
Management is responsible for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. The auditor must 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.