Does the audit of Goldfish Swim School's consolidated financial statements include expressing an opinion on the effectiveness of the company's internal control?
Goldfish_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing audits in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audits.
- Identify and assess the risks of material misstatement of the consolidated 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 consolidated financial statements.
- Obtain an understanding of internal control relevant to the audits 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 the Company'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 consolidated financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
Source: Item 22 — CONTRACTS (FDD pages 76–77)
What This Means (2025 FDD)
According to Goldfish Swim School's 2025 Franchise Disclosure Document, the independent auditor's report does not include an opinion on the effectiveness of the company's internal control. The auditor's responsibilities, as stated in the FDD, include obtaining an understanding of internal control relevant to the audit to design appropriate audit procedures, but explicitly not for the purpose of expressing an opinion on the effectiveness of the company's internal control.
This means that while the auditor assesses Goldfish Swim School's internal controls to plan the audit, they do not provide a separate opinion on whether those controls are effective. The auditor's focus is on whether the financial statements are free from material misstatement.
For a prospective franchisee, this indicates that the audit's primary goal is to ensure the accuracy of the financial statements, not to evaluate the strength of the company's internal controls. If a franchisee is concerned about the internal controls at Goldfish Swim School, they may want to ask the franchisor for more information about their internal control policies and procedures.