When auditing Brain Balance, what is the auditor's responsibility regarding internal controls?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing audits in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audits.
- 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 audits 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.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits.
Source: Item 23 — RECEIPTS (FDD pages 72–292)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, when performing audits in accordance with GAAS (Generally Accepted Auditing Standards), the auditor's responsibility regarding internal control is to obtain an understanding relevant to the audit. This understanding is used to design audit procedures appropriate for the circumstances, but it is explicitly not for the purpose of expressing an opinion on the effectiveness of Brain Balance's internal control. Therefore, the auditor's report will not include an opinion on the company's internal controls.
The auditor's focus is on identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error. To address these risks, the auditor designs and performs audit procedures, which include examining evidence related to the amounts and disclosures in the financial statements on a test basis. This process helps the auditor form an opinion on whether the financial statements are presented fairly in all material respects.
Furthermore, the auditor must communicate with those charged with governance regarding the planned scope and timing of the audits, any significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures that relevant parties are informed of important aspects of the audit and any potential issues discovered. The auditor's role is to provide reasonable assurance that the financial statements are free from material misstatement, while explicitly stating that the audit does not guarantee the detection of all misstatements, especially those resulting from fraud.