What is the auditor's responsibility regarding internal controls during the audit of Craters & Freighters?
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.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control—related matters that we identified during the audit.
Wipfli LLP
St.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, the auditor's responsibility regarding internal controls is to obtain an understanding of internal control relevant to the audit. This understanding is used to design audit procedures that are appropriate for the circumstances. However, the audit is not for the purpose of expressing an opinion on the effectiveness of Craters & Freighters' internal control, and accordingly, no such opinion is expressed.
In simpler terms, the auditor needs to know how Craters & Freighters' internal controls work to plan the audit effectively. This helps the auditor assess the risk of material misstatement in the financial statements, whether due to fraud or error, and to design audit procedures that are responsive to those risks. The auditor's procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis.
It's important to note that the auditor's focus is on the financial statements themselves, not on providing assurance about the overall quality of Craters & Freighters' internal controls. The auditor's responsibility is to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.
For a prospective franchisee, this means that while the financial statements are audited, the audit does not guarantee that Craters & Freighters has perfect internal controls. The auditor's role is to assess the financial statements' accuracy and reliability, and any concerns about internal controls are communicated separately to those in charge of governance.