Is the auditor expressing an opinion on the effectiveness of Checkers' internal control as part of the audit?
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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the auditor is not expressing an opinion on the effectiveness of the company's internal control. While the auditor obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, this is explicitly not for the purpose of forming an opinion on the effectiveness of Checkers' internal control.
This means that the audit focuses on the accuracy and fairness of the financial statements themselves, rather than on evaluating how well Checkers' internal systems prevent errors or fraud. The auditor's procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis, assessing risks of material misstatement, and evaluating accounting policies and estimates.
For a prospective Checkers franchisee, this indicates that the financial statements have been reviewed for accuracy, but there's no independent assessment of the strength of Checkers' internal controls. Franchisees may want to inquire separately about Checkers' internal controls and risk management practices to gain a more complete picture of the company's financial health and stability.