Does the auditor express an opinion on the effectiveness of Dq Treat's internal control?
Dq_Treat 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 the Company'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 the Company'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 17 — The following paragraph is added to the end of Item 17 of the Disclosure Document: (FDD pages 70–378)
What This Means (2025 FDD)
According to the 2025 FDD, the auditor's report for Dq Treat specifically states that while they obtain an understanding of internal control relevant to the audit, it is not for the purpose of expressing an opinion on the effectiveness of the company's internal control. Therefore, the auditor does not express an opinion on the effectiveness of Dq Treat's internal control.
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 Dq Treat has in place to manage its finances. The auditor's procedures include examining evidence regarding amounts and disclosures in the financial statements on a test basis and evaluating the appropriateness of accounting policies and the reasonableness of significant accounting estimates.
For a prospective Dq Treat franchisee, this indicates that the financial statements have been reviewed for accuracy and compliance with accounting standards, but there is no independent assessment of the strength of Dq Treat's internal controls. While the auditor communicates any identified internal control-related matters to those charged with governance, the absence of an opinion on internal control effectiveness means potential franchisees should conduct their own due diligence to assess the risks associated with the company's financial management practices.
It is common for franchise FDDs to include audited financial statements, but not necessarily an opinion on internal controls. Franchisees may want to ask Dq Treat about their internal control environment and what measures are in place to safeguard assets and ensure accurate financial reporting.