What is the significance of management designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of Crave Franchising, LLC's financial statements?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, the management of Crave Franchising, LLC is responsible for designing, implementing, and maintaining internal controls relevant to the preparation and fair presentation of the company's financial statements. This responsibility ensures that the financial statements are free from material misstatement, whether due to fraud or error, and are presented fairly in accordance with accounting principles generally accepted in the United States of America.
The presence of these internal controls is crucial for providing assurance to potential franchisees and other stakeholders that the financial information provided by Crave is reliable and accurate. These controls help to prevent errors and fraud, ensuring that the financial statements reflect the true financial position of the company. This is a standard practice, as it is management's responsibility to provide reliable financial statements.
The independent auditor's report explicitly mentions management's responsibility for these internal controls, highlighting their importance in the audit process. The auditors rely on these controls to assess the risk of material misstatement in the financial statements and to design audit procedures that are appropriate in the circumstances. This ultimately contributes to the auditor's opinion on whether the financial statements present fairly the company's financial position and results of operations.
For a prospective franchisee, this signifies that Crave has taken steps to ensure the integrity of its financial reporting. This can provide a level of comfort and confidence when reviewing the financial statements included in the FDD, which are essential for making an informed investment decision. It is a standard practice for franchisors to have these controls in place, and it is a positive sign that Crave's auditors have acknowledged management's responsibility in this area.