What is the auditor's responsibility regarding internal control when auditing Checkers?
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, when performing an audit, the auditor's responsibility regarding internal control is to obtain an understanding of internal control relevant to the audit. This understanding is used to design audit procedures that are appropriate for the circumstances.
However, the audit is not performed for the purpose of expressing an opinion on the effectiveness of Checkers' internal control. Consequently, the auditor's report will not include such an opinion. This means that while the auditor assesses internal controls to plan the audit, they do not provide assurance that those controls are effective.
The auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audit, any significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures that relevant parties are informed of important aspects of the audit and any issues that may arise. This is a standard practice in financial auditing, ensuring transparency and accountability.
For a prospective Checkers franchisee, this means that the financial statements have been examined by an independent auditor, but the auditor's work does not include a specific assessment of the strength of Checkers' internal controls. Franchisees may want to consider this when evaluating the financial health and stability of the company.