Does the audit of Crepe De Licious include expressing an opinion on the effectiveness of internal control?
Crepe_De_Licious 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 Crepe Delicious Holding USA, Inc.'s internal control. Accordingly, no such opinion is expressed.
- 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.
Source: Item 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to the 2025 FDD, the audit of Crepe De Licious does not include expressing an opinion on the effectiveness of internal control. While the auditors obtain an understanding of internal control relevant to the audit to design appropriate procedures, the FDD explicitly states that this is not for the purpose of expressing an opinion on the effectiveness of Crepe Delicious Holding USA, Inc.'s internal control. Therefore, no such opinion is expressed.
This means that the audit focuses on the financial statements themselves, ensuring they are free from material misstatement, rather than evaluating the systems and processes Crepe De Licious has in place to manage its finances. The auditors' responsibilities include identifying and assessing the risks of material misstatement, examining evidence regarding amounts and disclosures in the financial statements, and evaluating the appropriateness of accounting policies. However, these procedures are designed to inform the audit of the financial statements, not to provide assurance on the internal controls.
For a prospective franchisee, this implies that the audit provides a reasonable level of assurance that the financial statements of Crepe De Licious are fairly presented. However, it does not offer any guarantee about the strength or effectiveness of the company's internal controls. A potential franchisee may want to inquire separately about Crepe De Licious's internal control environment and risk management practices to gain a more complete understanding of the company's financial health and stability.