During the audit of Checkers' financial statements, is the purpose to express an opinion on the effectiveness of the company's internal control?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with US GAAS, 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 a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the purpose of the audit of the company's financial statements is not to express an opinion on the effectiveness of the company's internal control. While the auditors do obtain an understanding of internal control relevant to the audit, this is done to design appropriate audit procedures, not to provide an opinion on the overall effectiveness of Checkers' internal controls.
This means that the audit focuses on whether the financial statements are free of material misstatement. The auditors design their procedures to assess the risk of misstatement and examine evidence supporting the amounts and disclosures in the financial statements. They evaluate the accounting policies used and the reasonableness of management's estimates, and assess the overall presentation of the financial statements.
For a prospective Checkers franchisee, this indicates that the financial statements have been examined for accuracy and reliability, but the audit does not provide assurance about the strength of the company's internal controls. While the auditors are required to communicate any significant internal control-related matters they identify during the audit to those charged with governance, the audit's primary goal is to provide an opinion on the fairness of the financial statements, not on the effectiveness of internal control.