What is the auditor's responsibility regarding internal control during the audit of Engel & Volkers?

According to Engel & Volkers' 2025 Franchise Disclosure Document, the auditor's responsibility regarding internal control is to obtain an understanding of internal control relevant to the audit. This understanding is used to design audit procedures that are appropriate for the circumstances. However, the audit is not for the purpose of expressing an opinion on the effectiveness of Engel & Völkers Americas, Inc. and Subsidiary's internal control, and accordingly, no such opinion is expressed.

The auditor's procedures include examining evidence regarding the amounts and disclosures in the consolidated 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 the overall presentation of the consolidated financial statements.

Furthermore, the auditor must 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. This communication ensures that relevant parties are informed of any issues or findings that may arise during the audit process.

For a prospective Engel & Volkers franchisee, this means that while the financial statements are audited, the audit's focus is not on providing assurance about the effectiveness of the company's internal controls. Franchisees should be aware that the audit is designed to detect material misstatements in the financial statements, but it does not guarantee that all internal control weaknesses will be identified or addressed.