What is the auditor's responsibility regarding internal control when auditing Cinnabon's financial statements?
Cinnabon 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 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to the 2025 Cinnabon Franchise Disclosure Document, the auditor's responsibility regarding internal control is to obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. However, this understanding is not for the purpose of expressing an opinion on the effectiveness of Cinnabon's internal control, and the auditor's report will explicitly state that no such opinion is expressed. This means the auditor assesses Cinnabon's internal controls only to the extent necessary to plan the audit, not to verify the strength of those controls.
In simpler terms, the auditor, Grant Thornton LLP, reviews Cinnabon's internal controls to figure out the best way to conduct the audit. They want to understand how Cinnabon ensures its financial statements are accurate. But the auditor doesn't give an official thumbs-up or thumbs-down on how good Cinnabon's internal controls are. Their focus is on whether the financial statements are fairly presented.
For a prospective Cinnabon franchisee, this means the financial statements have been audited by an independent firm, but the audit does not provide assurance about the effectiveness of Cinnabon's internal controls. Franchisees should be aware that while the financial statements are deemed to be fairly presented, the audit does not guarantee that Cinnabon's internal controls are flawless or prevent all potential errors or fraud. This is a standard practice in financial auditing, where the primary goal is to assess the accuracy and reliability of the financial statements themselves.