What must an auditor do regarding internal controls when auditing Deer Solution's financial statements?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Deer Solution Franchising, LLC'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.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Deer Solution Franchising, LLC'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.
Source: Item 23 — RECEIPTS (FDD pages 55–246)
What This Means (2025 FDD)
According to Deer Solution's 2025 Franchise Disclosure Document, when performing an audit, the auditor must obtain an understanding of internal controls relevant to the audit to design appropriate audit procedures. However, the auditor's purpose is not to express an opinion on the effectiveness of Deer Solution's internal control, and the auditor will not express such an opinion. The auditor's responsibility includes communicating with those in charge of governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control related matters identified during the audit.
This means that while the auditor will review Deer Solution's internal controls to plan the audit, they are not responsible for providing assurance on how effective those controls are. The auditor's focus is on whether the financial statements are free from material misstatement. The auditor will assess the risk of misstatement, whether due to fraud or error, and design audit procedures accordingly.
For a prospective Deer Solution franchisee, this indicates that the financial statements have been examined by an independent auditor, but the audit does not provide a guarantee that all internal control weaknesses will be identified or addressed. The franchisee should be aware that the auditor's focus is on the accuracy of the financial statements, not on the overall effectiveness of the company's internal controls.