When auditing Buildingstars International, Inc.'s consolidated financial statements, is the auditor required to express an opinion on the effectiveness of Buildingstars' internal control?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted auditing standards in the United States of America, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the consolidated 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 consolidated 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 Buildingstars International, Inc.'s internal control. Accordingly, no such opinion is expressed.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 34–43)
What This Means (2025 FDD)
According to Buildingstars' 2025 Franchise Disclosure Document, the auditor is not required to express an opinion on the effectiveness of Buildingstars' internal control. 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 for the purpose of expressing an opinion on the effectiveness of Buildingstars' internal control.
The auditor's objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. This assurance is not absolute, and there is a risk that a material misstatement may not be detected, especially if it results from fraud involving collusion, forgery, or the override of internal control.
The auditor's report for Buildingstars includes their opinion on whether the consolidated financial statements present fairly the financial position, results of operations, and cash flows of Buildingstars in accordance with accounting principles generally accepted in the United States of America. The audit is conducted in accordance with auditing standards generally accepted in the United States of America, which require the auditor to be independent and to meet ethical responsibilities.
Prospective franchisees should understand that while the auditor assesses internal controls to design appropriate audit procedures, they do not provide a separate opinion on the effectiveness of those controls. This means that the audit focuses on the accuracy and reliability of the financial statements themselves, rather than on the overall quality of Buildingstars' internal control systems.