What is Fly Fitness Franchise LLC's management responsible for regarding internal controls related to financial statement preparation?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 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 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 Fly Fitness Franchise LLC'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 21 — FINANCIAL STATEMENTS (FDD page 44)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, management is responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. This means Fly Fitness's management must establish and uphold internal controls to ensure the accuracy and reliability of the company's financial reporting. These controls are designed to prevent and detect errors or fraud that could materially misstate the financial statements.
In addition to maintaining internal controls, Fly Fitness's management is also required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Fly Fitness's ability to continue as a going concern within one year after the date that the financial statements are available to be issued. This involves assessing the company's financial health and its ability to meet its obligations in the near term. If there are significant concerns about the company's ability to continue operating, this must be disclosed in the financial statements.
The auditor's report also highlights the responsibilities of management in preparing the financial statements. The auditor's role is to provide an independent opinion on whether the financial statements present fairly the financial position of Fly Fitness in accordance with generally accepted accounting principles. However, the ultimate responsibility for the accuracy and integrity of the financial statements rests with Fly Fitness's management.
Prospective franchisees should understand that the franchisor's financial stability and the accuracy of its financial reporting are critical for assessing the overall health and sustainability of the franchise system. Therefore, it's important to review the financial statements and auditor's report carefully and to seek professional advice if needed to fully understand the franchisor's financial condition.