Is the auditor's understanding of internal control for the purpose of expressing an opinion on the effectiveness of Checkers' 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the auditor's understanding of internal control is not for the purpose of expressing an opinion on the effectiveness of Checkers' internal control. Instead, the auditor obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate for the circumstances. As such, the auditor does not express an opinion on the effectiveness of Checkers' internal control.
This means that while the auditor assesses Checkers' internal controls to plan the audit, they are not providing a separate, formal opinion on how well those controls function. The audit focuses on the accuracy and reliability of the financial statements themselves.
For a prospective franchisee, this highlights the importance of conducting their own due diligence regarding Checkers' financial health and internal controls. While the financial statements are audited, the effectiveness of the underlying controls is not independently verified. Therefore, a franchisee should consider seeking professional advice to evaluate the risks and potential issues related to Checkers' financial management.