For the audit of Crave Cookies, what must the auditor understand regarding internal controls?
Crave_Cookies 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 Crave Cookies Franchising, LLC's internal control. Accordingly, no such opinion is expressed.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the auditor must obtain an understanding of internal control relevant to the audit to design audit procedures that are appropriate in the circumstances. However, this understanding is not for the purpose of expressing an opinion on the effectiveness of Crave Cookies Franchising, LLC's internal control, and accordingly, no such opinion is expressed.
This means the auditor needs to understand how Crave Cookies manages its financial processes and systems to plan the audit effectively. The auditor's focus is on identifying potential risks of material misstatement in the financial statements, whether due to fraud or error. By understanding the internal controls, the auditor can design specific tests and procedures to address these risks.
However, it's important to note that the auditor's responsibility is not to evaluate or provide assurance on the overall effectiveness of Crave Cookies' internal controls. The auditor's understanding of internal controls is solely for the purpose of conducting a thorough and accurate audit of the financial statements. This is a standard practice in auditing, where the primary goal is to ensure the financial statements are fairly presented and free from material misstatements.