Does the auditor express an opinion on the effectiveness of Craters & Freighters' internal control?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
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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\neffectiveness of Craters & Freighters Franchise Company's internal control. Accordingly, no such opinion is\nexpressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Craters & Freighters Franchise Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, the auditor does not express an opinion on the effectiveness of Craters & Freighters Franchise Company's internal control. While the auditor obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, this understanding is not for the purpose of expressing an opinion on the effectiveness of the company's internal control.
The auditor's responsibilities include exercising professional judgment, maintaining professional skepticism, identifying and assessing risks of material misstatement, and evaluating the appropriateness of accounting policies and the reasonableness of significant accounting estimates. The auditor also determines whether there are conditions that raise substantial doubt about Craters & Freighters' ability to continue as a going concern.
This means that while the auditor reviews Craters & Freighters' internal controls to some extent, they do not provide an independent assessment or guarantee of their effectiveness. A prospective franchisee should be aware that the financial statements are audited for accuracy and fair presentation, but the internal controls that ensure this accuracy are not independently validated.
For a potential Craters & Freighters franchisee, this highlights the importance of conducting thorough due diligence, including reviewing the financial statements and understanding the company's internal control environment. It may be prudent to ask Craters & Freighters about their internal control policies and procedures and to consider seeking independent financial advice.