When auditing Exit, is the purpose to express an opinion on the effectiveness of Upper Midwest Realty, Inc.'s internal control?
Exit Franchise · 2025 FDDAnswer from 2025 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 Upper Midwest Realty, Inc. d.b.a. Exit Realty Upper Midwest'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 Upper Midwest Realty, Inc. d.b.a. Exit Realty Upper Midwest's ability to continue as a going concern for a reasonable period of time.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the audit performed in accordance with generally accepted auditing standards is not for the purpose of expressing an opinion on the effectiveness of Upper Midwest Realty, Inc.'s internal control. Instead, the audit aims to assess the financial statements for material misstatements, evaluate accounting policies, and determine if there are any concerns about the company's ability to continue as a going concern.
The auditors' responsibilities include exercising professional judgment, identifying risks of material misstatement, and examining evidence related to the financial statement amounts and disclosures. While the auditors do gain an understanding of internal control, it is only to design appropriate audit procedures and not to provide an opinion on the effectiveness of the internal controls themselves.
This means that while Exit franchisees can rely on the audited financial statements to gain insight into the financial health and stability of Upper Midwest Realty, Inc., the audit does not provide assurance regarding the strength or effectiveness of the company's internal controls. A prospective franchisee may want to inquire separately about Upper Midwest Realty, Inc.'s internal control practices and procedures to gain a more complete understanding of the company's operational and financial management.