What specific actions might fraud involve that make it harder to detect in Checkers' financial statements?

According to Checkers' 2025 Franchise Disclosure Document, fraud can be difficult to detect in financial statements due to specific actions that may be taken to conceal it. The FDD indicates that detecting material misstatements resulting from fraud poses a higher risk compared to errors.

Specifically, the document states that fraud may involve collusion, where multiple parties secretly cooperate to commit the act, making it harder for auditors to uncover. Forgery, which involves creating false documents or altering genuine ones, can also obscure fraudulent activities. Intentional omissions, where key information is deliberately left out of the financial records, further complicate detection. Misrepresentations, which involve presenting false or misleading information, can deceive auditors and other stakeholders. Finally, the override of internal control, where individuals in positions of authority bypass established procedures, can allow fraud to go undetected.

These actions make it more challenging for auditors to provide absolute assurance that the financial statements are free from material misstatements. While auditors aim to obtain reasonable assurance, the deceptive nature of fraud means that even a well-conducted audit may not always uncover it. This is a standard disclosure in audited financial statements and reflects the inherent limitations in the audit process when dealing with intentional deception.