What is the auditor's responsibility regarding the design of audit procedures that are appropriate in the circumstances for Checkersrallys?
Checkersrallys 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the auditor's responsibility includes obtaining an understanding of internal control relevant to the audit. This understanding is used to design audit procedures that are appropriate for the specific circumstances of the audit. However, the audit is not for the purpose of expressing an opinion on the effectiveness of Checkersrallys's internal control, and therefore, no such opinion is expressed.
In practical terms, this means the auditor assesses Checkersrallys's internal controls to determine how reliable the financial data is. Based on this assessment, the auditor tailors the audit procedures to focus on areas with higher risk of misstatement. For example, if Checkersrallys has weak inventory controls, the auditor might spend more time verifying inventory balances.
Prospective franchisees should understand that the audit provides reasonable assurance that the financial statements are free from material misstatement. However, it is not a guarantee of absolute accuracy. The auditor's focus is on designing procedures appropriate for the circumstances, not on providing a comprehensive evaluation of internal controls or detecting all possible errors or fraud.