What is the purpose of obtaining an understanding of internal control relevant to the audit of Carbones Pizzeria?
Carbones_Pizzeria 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 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 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 consolidated 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
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the purpose of understanding internal control during an audit is to design appropriate audit procedures. The audit aims to identify potential risks of material misstatement in the financial statements, whether due to fraud or error. This understanding helps auditors tailor their examination of evidence related to financial statement amounts and disclosures.
The auditors are not expressing an opinion on the effectiveness of Carbones Pizzeria's internal controls. Instead, they use their understanding of these controls to inform the scope and nature of their audit procedures. This approach is standard in financial auditing, where the focus is on the accuracy and reliability of the financial statements rather than the internal control system itself.
The audit also involves evaluating the accounting policies used by Carbones Pizzeria and the reasonableness of significant accounting estimates made by management. Additionally, the auditors assess the overall presentation of the consolidated financial statements to ensure they comply with generally accepted accounting principles. The auditors must also conclude whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern.
The auditors are required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures transparency and provides an opportunity for those in governance to address any concerns raised during the audit process.