What is the auditor's responsibility when reading the 'other information' related to Carls' financial statements?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
Management is responsible for the other information included in the supplemental schedules. The other information comprises the combining consolidating balance sheets and combining consolidating statements of operations included in the supplemental schedules, but does not include the combined consolidated financial statements and our auditors' report thereon. Our opinion on the combined consolidated financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon.
In connection with our audit of the combined consolidated financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the combined consolidated financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the auditor's responsibility regarding the 'other information' included in supplemental schedules is to read it and consider whether there is a material inconsistency between this information and the combined consolidated financial statements. The 'other information' includes the combining consolidating balance sheets and combining consolidating statements of operations, but specifically excludes the combined consolidated financial statements and the auditor's report.
The auditor's opinion on the combined consolidated financial statements does not extend to this 'other information,' and they do not express any opinion or assurance on it. However, if the auditor identifies an uncorrected material misstatement in the 'other information' based on their work, they are required to describe it in their report.
For a prospective Carls franchisee, this means that while the core financial statements are audited and receive an opinion from the auditor, the supplemental schedules have a different level of scrutiny. The auditor's role is limited to checking for inconsistencies or obvious misstatements, but not to provide a full audit opinion. Therefore, franchisees should be aware that these supplemental schedules, while providing additional detail, have not been subjected to the same level of verification as the primary financial statements.