For a Fly Fitness audit, what is the purpose of obtaining an understanding of internal control?

According to Fly Fitness's 2024 Franchise Disclosure Document, when performing an audit, the auditor obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. However, this understanding is not for the purpose of expressing an opinion on the effectiveness of Fly Fitness's internal control, and accordingly, no such opinion is expressed.

This means that while the auditor will review Fly Fitness's internal controls to plan the scope and nature of their audit, the audit is not designed to provide assurance that those controls are effective. The auditor's focus is on whether the financial statements are free from material misstatement.

For a prospective Fly Fitness franchisee, this highlights the importance of understanding the franchisor's financial reporting and internal controls. While the audit provides some level of assurance, it is not a guarantee of the accuracy or reliability of the financial information. Franchisees may want to conduct their own due diligence to assess the franchisor's financial stability and internal control environment.