How does C12 Group assess collectability of receivables?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted auditing 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 The C12 Group, LLC'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.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the C12 Group's financial statements are audited by an independent auditor. As part of this audit, the auditor assesses the fair presentation of the financial statements, which includes accounts receivable. The auditor examines evidence regarding the amounts and disclosures in the financial statements on a test basis. They evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management. This would include the policies and estimates related to the collectability of accounts receivable.
Management of C12 Group is responsible for the preparation and fair presentation of the financial statements, including the design, implementation, and maintenance of internal control relevant to these statements. This responsibility extends to ensuring that the financial statements are free from material misstatement, whether due to fraud or error. Evaluating the collectability of receivables is part of this process, as it impacts the fair presentation of the company's financial position.
The auditor's role is to obtain reasonable assurance that the financial statements as a whole are free from material misstatement. This includes assessing the risks of material misstatement of the financial statements, whether due to fraud or error, and designing and performing audit procedures responsive to those risks. While the auditor does not express an opinion on the effectiveness of C12 Group's internal control, they do obtain an understanding of internal control relevant to the audit in order to design appropriate audit procedures. Therefore, the auditor will review the process C12 Group uses to determine the collectability of receivables.
Prospective franchisees should be aware that the FDD does not provide specific details on the exact methods C12 Group uses to determine the collectability of receivables. For more detailed information, a prospective franchisee should consider asking C12 Group for specific details on their policies and procedures for assessing the collectability of accounts receivable, including the criteria used to determine when an account is considered uncollectible and how the allowance for doubtful accounts is calculated.