What kind of evidence should be examined during a Carbones Pizzeria audit?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
The federal and state income tax returns of the Company are subject to examination by the income taxing authorities, generally for three years after they were filed. Interest and penalties, if any, assessed by income taxing authorities, will be recorded in operating expenses.
In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("US GAAP"), management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates made by the Company are made by the Company the allowance for doubtful accounts and the tax valuation allowance. Actual results could differ from those estimates.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the federal and state income tax returns of Carbone's Pizzeria are subject to examination by income taxing authorities. This examination generally occurs for three years after the returns were filed. During an audit, the company's policy is to evaluate the likelihood that its uncertain tax positions will prevail upon examination. This evaluation is based on the extent to which those positions have substantial support within the IRC (Internal Revenue Code) and Regulations, Revenue Rulings, court decisions, and other evidence.
For a prospective Carbones Pizzeria franchisee, this means that the financial records and tax filings of the company are open to scrutiny by tax authorities. Any discrepancies or unsupported tax positions could lead to additional taxes, interest, and penalties. The FDD indicates that interest and penalties, if any, assessed by income taxing authorities, will be recorded in operating expenses.
It is important to note that the management of Carbones Pizzeria makes estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities. These estimates are based on historical experience and various other factors. However, actual results could differ from those estimates, which could impact the financial statements and potentially be a point of focus during an audit. Therefore, a franchisee should be aware of the potential for adjustments and their impact on the company's financial performance.