What responsibility does the management of City Publications have regarding internal controls for financial statement preparation?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about CITY PUBLICATIONS FRANCHISE GROUP, INC.'s ability to continue as a going concern for one year after the date that the financial statements are issued.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 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 from material misstatement, whether due to fraud or error.
In fulfilling this responsibility, City Publications' management must adhere to accounting principles generally accepted in the United States of America. They are also required to evaluate 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 financial statements are issued. This evaluation is crucial for providing stakeholders with a clear understanding of the company's financial health and stability.
The independent auditor's report included in the FDD emphasizes that while they audit the financial statements, it is management's responsibility to establish and maintain these internal controls. The auditor's role is to obtain an understanding of these controls to design appropriate audit procedures but not to express an opinion on their effectiveness. This division of responsibilities is standard in financial auditing, ensuring that management is accountable for the integrity of the financial reporting process.