When auditing Boulder Designs, does the audit include expressing an opinion on the effectiveness of the company's internal control?
Boulder_Designs 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 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 23 — RECEIPT (FDD pages 50–217)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, the audit conducted on the company's financial statements does not include expressing an opinion on the effectiveness of its internal control. The independent auditor's report outlines the procedures undertaken during the audit, which are designed to assess the fairness of the financial statements.
The auditor's responsibilities include obtaining an understanding of internal control relevant to the audit to design appropriate audit procedures. However, this understanding is not used for the purpose of expressing an opinion on the effectiveness of Boulder Designs' internal control. The audit focuses on identifying and assessing the risks of material misstatement of the financial statements, evaluating the appropriateness of accounting policies, and assessing the overall presentation of the financial statements.
This means that while the auditor considers internal controls to design the audit, they do not provide a separate opinion on whether those controls are effective. A prospective Boulder Designs franchisee should be aware that the financial statements have been audited for accuracy and fair presentation, but the audit does not guarantee the strength or effectiveness of the company's internal controls.