What level of assurance does the accountant's review engagement provide regarding the Coffee News financial statements?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
The Board of Directors 2703203 Manitoba, Ltd.
We have reviewed the accompanying financial statements of 2703203 Manitoba, Ltd. (a corporation), which comprise the balance sheets—income tax basis as of July 31, 2024 and 2023, and the related statements of operations and accumulated deficit—income tax basis and cash flows—income tax basis for the years then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management's financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the basis of accounting the company uses for income tax purposes; this includes determining that the basis of accounting the company uses for income tax purposes is an acceptable basis for the preparation of financial statements in the circumstances. Management is also responsible 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.
Accountant's Responsibility
Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with the basis of accounting the company uses for income tax purposes. We believe that the results of our procedures provide a reasonable basis for our conclusion.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to Coffee News's 2025 Franchise Disclosure Document, the independent accountant's review report for 2703203 Manitoba, Ltd. states that a review includes applying analytical procedures to management's financial data and making inquiries of company management. The report emphasizes that a review is substantially less in scope than an audit, and as such, the accountant does not express an opinion on the financial statements as a whole. Instead, the accountant's responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services, aiming to obtain limited assurance. This limited assurance serves as a basis for reporting whether the accountant is aware of any material modifications needed for the financial statements to align with the company's income tax basis of accounting. The accountant believes that the results of their procedures provide a reasonable basis for their conclusion.
For a prospective Coffee News franchisee, this means the financial statements of 2703203 Manitoba, Ltd. have been subjected to a review, which offers a lower level of assurance compared to a full audit. While the review provides some level of scrutiny, it does not offer the same confidence that an audit would. The accountant's conclusion indicates whether they are aware of any significant issues requiring modification to the financial statements, but it does not guarantee the accuracy or completeness of the financials to the same extent as an audit opinion.
It is important for potential franchisees to understand the difference between a review and an audit when evaluating the financial health of Coffee News. A review relies more on analytical procedures and inquiries, whereas an audit involves a more in-depth examination of evidence. Therefore, franchisees should consider the limitations of a review engagement and, if necessary, seek additional financial information or advice to make an informed investment decision. This is a fairly standard practice for franchise systems, as many provide reviewed rather than audited financial statements in their FDDs.