What is the auditor's responsibility for maintaining professional skepticism during the audit of Cool Binz?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
We have the right at any time during business hours, and without prior notice to you, to inspect and audit, or cause to be inspected and audited, any and all financial statements, reports, income tax records, sales tax records, payroll records, software databases, and other records. You must cooperate fully with our representatives and independent accountants we hire to conduct any inspection or audit.
If any inspection or audit discloses an understatement of Gross Sales, we can debit your account, as provided in Sections 2.C and 2.H of this Agreement, for the Royalty and Brand Marketing Fees which are due on the amount of the understatement, plus interest, at the rate of 18% per annum or the maximum rate permitted by applicable law, whichever is lesser, and all late fees, from the date originally due until the date of payment.
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
Based on the 2025 Cool Binz Franchise Disclosure Document, the document outlines Cool Binz's right to audit franchisees but does not specify the auditor's responsibility for maintaining professional skepticism. Cool Binz has the right to inspect and audit a franchisee's financial statements, reports, income tax records, sales tax records, payroll records, software databases, and other records at any time during business hours and without prior notice. The franchisee must cooperate fully with Cool Binz's representatives and independent accountants during any inspection or audit.
If an audit reveals an understatement of Gross Sales, Cool Binz can debit the franchisee's account for the Royalty and Brand Marketing Fees due on the understated amount, plus interest at a rate of 18% per annum (or the maximum rate permitted by law) and all late fees, from the original due date until payment. Franchisees are also required to use Cool Binz's designated accounting software, currently QuickBooks Online, and follow their specified Chart of Accounts, which Cool Binz can change at its discretion. Cool Binz also has automatic password access to the franchisee's financial reports on this system.
While the FDD details Cool Binz's audit rights and the franchisee's obligations, it does not discuss the specific duties or standards expected of the independent accountants they hire, including the maintenance of professional skepticism. A prospective franchisee should seek clarification from Cool Binz regarding the specific standards and expectations for auditors during these audits to fully understand the scope and nature of the audit process.