What is the auditor's responsibility regarding internal controls during the audit of Cicis' financial statements?
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' 2025 Franchise Disclosure Document, the auditor's responsibility regarding internal controls is to obtain an understanding of internal control relevant to the audit. This understanding is used to design audit procedures that are appropriate for the circumstances. However, the audit is not for the purpose of expressing an opinion on the effectiveness of Cicis' internal control, and accordingly, no such opinion is expressed.
This means that while the auditor must assess Cicis' internal controls to plan the audit, they are not responsible for verifying or guaranteeing the effectiveness of those controls. The auditor's focus is on whether the financial statements are free from material misstatement.
For a prospective Cicis franchisee, this highlights that the financial statements have been audited for accuracy, but the audit does not provide assurance about the strength of Cicis' internal controls. Franchisees may want to inquire separately about Cicis' internal control environment and risk management practices to gain a more complete picture of the company's financial health and stability.