What is Exit management's responsibility regarding internal controls for financial statement preparation?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, management is responsible for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of consolidated financial statements. These controls should ensure the statements are free from material misstatement, whether due to fraud or error. This responsibility aligns with generally accepted accounting principles in the United States.
In practical terms, Exit's management must establish and maintain systems and procedures to accurately record and report financial data. This includes controls to prevent and detect errors or fraud that could significantly impact the financial statements. These controls are crucial for ensuring the reliability and integrity of the financial information provided to franchisees, investors, and regulatory bodies.
Furthermore, Exit's management is required to evaluate whether there are conditions or events that raise substantial doubt about the company's ability to continue as a going concern within one year after the date the financial statements are available. This evaluation is a critical part of preparing the financial statements and ensuring transparency about the company's financial health. The auditor's responsibilities complement management's, as they aim to obtain reasonable assurance that the financial statements are free from material misstatement.