Does the audit of Counselor Realty express an opinion on the effectiveness of the company's internal control?
Counselor_Realty 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, the independent auditor's report does not express an opinion on the effectiveness of the company's internal control. The report outlines the auditor's responsibilities, which include obtaining an understanding of internal control relevant to the audit to design appropriate audit procedures. However, the auditors' responsibilities do not include expressing an opinion on the effectiveness of Counselor Realty's internal control.
Specifically, the audit aims to provide reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The auditor designs procedures to identify and assess risks of material misstatement and examines evidence regarding the amounts and disclosures in the financial statements.
This means that while the auditors consider internal controls to design their audit approach, they do not provide an independent assessment of how well those controls function. A prospective franchisee should be aware that the financial statements have been audited for accuracy and compliance with accounting standards, but the audit does not guarantee the effectiveness of Counselor Realty's internal controls.