During an audit of Cicis, is an opinion expressed on the effectiveness of the company's internal control?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the 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 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 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 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the auditor does not express an opinion on the effectiveness of the company's internal control. While the auditors gain an understanding of internal controls relevant to the audit, this is done to design appropriate audit procedures, not to provide an assessment of how well those controls function. The auditor's primary goal is to determine if the financial statements are free from material misstatement.
Specifically, the audit aims to obtain reasonable assurance that the financial statements do not contain material misstatements, whether due to fraud or error, and to issue an auditor's report that includes their opinion on the financial statements. The auditor's procedures include examining evidence related to the amounts and disclosures in the financial statements on a test basis. They also evaluate the appropriateness of accounting policies and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements.
This means that while the audit will touch on internal controls, a prospective Cicis franchisee should not expect the audit to provide a guarantee that Cicis's internal controls are effective. The auditor's focus is on the financial statements themselves, and their opinion is limited to whether those statements fairly present the company's financial position. If a franchisee wants to know more about the effectiveness of Cicis's internal controls, they should ask Cicis directly.