Does the audit of Browns Chicken include expressing an opinion on the effectiveness of the company's internal control?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted accounting standards, 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 Brown's Chicken, LLC's internal control. Accordingly, no such opinion is expressed.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 42)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the independent auditor's report does not include an opinion on the effectiveness of the company's internal control. While the auditors obtain an understanding of internal control relevant to the audit, it is specifically not for the purpose of expressing an opinion on its effectiveness.
This means that the audit focuses on whether the financial statements are free from material misstatement, but it does not assess how well Browns Chicken's internal controls prevent errors or fraud. A prospective franchisee should understand that the financial statements have been reviewed for accuracy, but there is no guarantee that the company's internal systems are robust.
This is a fairly standard practice in franchise auditing. While auditors are required to understand a company's internal controls, they are not always required to provide an opinion on them. A franchisee who is concerned about the strength of Browns Chicken's internal controls may want to ask the franchisor directly about their procedures and safeguards.