Does the auditor express an opinion on the effectiveness of Goldfish Swim School'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 the 2025 Goldfish Swim School FDD, the auditor does not express an opinion on the effectiveness of the company's internal control. While the auditor obtains an understanding of internal controls, it is solely to design audit procedures appropriate for the circumstances. The audit's purpose is to provide an opinion on the financial statements themselves, not on the internal controls. This is a standard practice in financial auditing.
The auditor's report outlines the responsibilities of both the management and the auditor. Management is responsible for designing, implementing, and maintaining internal controls relevant to the preparation and fair presentation of consolidated financial statements. The auditor's responsibility is to express an opinion on the financial statements based on their audit.
This means that while the auditor assesses internal controls to some extent, a prospective Goldfish Swim School franchisee should not rely on the audit report as an endorsement of the company's internal control systems. If a franchisee wants assurance about the effectiveness of internal controls, they may need to conduct their own independent assessment or seek additional information from Goldfish Swim School regarding their internal control practices.