When auditing Cicis, is the purpose to express an opinion 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 purpose of the audit is not to express an opinion on the effectiveness of the company's internal control. While the auditors obtain an understanding of internal control relevant to the audit, this is done to design appropriate audit procedures. The FDD explicitly states that no opinion is expressed on the effectiveness of Cicis's internal control.
This means that the audit focuses on whether the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes their opinion. The auditors' responsibilities include exercising professional judgment, assessing risks of material misstatement, examining evidence, evaluating accounting policies, and concluding whether there are conditions that raise doubt about Cicis's ability to continue as a going concern.
For a prospective Cicis franchisee, this indicates that the audit provides assurance on the fairness of the financial statements but does not guarantee the effectiveness of internal controls. Franchisees may want to inquire separately about Cicis's internal control environment and risk management practices to gain a more complete understanding of the company's financial health and stability.