What is the auditor's responsibility regarding internal controls during the audit of Dq Treat?
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 responsibility regarding internal controls during the audit of Dq Treat's financial statements is to obtain an understanding of internal control relevant to the audit. This understanding is for the purpose of designing audit procedures that are appropriate in the circumstances. However, the audit is not for the purpose of expressing an opinion on the effectiveness of Dq Treat's internal control, and therefore no such opinion is expressed.
The auditor's procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
Furthermore, the auditor must exercise professional judgment and maintain professional skepticism throughout the audit. The auditor also identifies and assesses the risks of material misstatement of the financial statements, whether due to fraud or error, and designs and performs audit procedures responsive to those risks. The auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit.
In summary, while the auditor assesses Dq Treat's internal controls to tailor the audit, the primary goal is to provide an opinion on the fairness of the financial statements, not to evaluate the effectiveness of the internal controls themselves. A prospective franchisee should be aware that the audit provides reasonable assurance, but not a guarantee, that the financial statements are free from material misstatement.