Is Chocolate Fish Coffee's management responsible for implementing internal controls?

According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, management is responsible for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements. This responsibility ensures that the financial statements are free of material misstatement, whether due to fraud or error.

Specifically, Chocolate Fish Coffee's management is tasked with preparing and fairly presenting the company's financial statements in accordance with accounting principles generally accepted in the United States of America. This includes evaluating whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern for one year after the date that the financial statements are available to be issued.

An independent accountant's audit report included in the FDD emphasizes that their audit does not express an opinion on the effectiveness of Chocolate Fish Coffee's internal controls. The auditor's role is to obtain an understanding of internal control relevant to the audit in order to design appropriate audit procedures, but not to provide assurance on the overall effectiveness of those controls. This distinction highlights that while the management is responsible for the internal controls, the auditor focuses on assessing the risk of material misstatement in the financial statements.