Does the auditor express an opinion on the effectiveness of Devon Creek's internal control?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
In performing an audit in accordance with generally accepted auditing standards, 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 the Company's internal control. Accordingly, no such opinion is expressed.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, the auditor does not express an opinion on the effectiveness of the company's internal control. While the auditor obtains an understanding of internal control relevant to the audit to design appropriate audit procedures, this is not for the purpose of expressing an opinion on the effectiveness of Devon Creek's internal control.
This means that the audit focused on the financial statements themselves, ensuring they are free from material misstatement, rather than evaluating the systems and processes Devon Creek has in place to maintain accurate financial records. The auditor's responsibilities include identifying and assessing the risks of material misstatement of the financial statements, examining evidence regarding the amounts and disclosures in the financial statements, and evaluating the appropriateness of accounting policies used by management.
For a potential Devon Creek franchisee, this implies that while the financial statements have been audited for accuracy, there is no independent assessment of the strength of Devon Creek's internal controls. Therefore, a franchisee may want to conduct their own due diligence to understand how Devon Creek manages its financial processes and ensures accuracy and compliance.