Does the audit of Moes Southwest Grill express an opinion on the effectiveness of the company's internal control?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with US GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- 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 audit 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 23 — Receipts (FDD pages 92–334)
What This Means (2025 FDD)
According to the 2025 FDD, the audit report for GoTo Foods LLC, the parent company of Moes Southwest Grill, does not express an opinion on the effectiveness of the company's internal control. The report outlines the auditor's responsibilities, which include obtaining an understanding of internal control relevant to the audit. However, this understanding is solely for the purpose of designing appropriate audit procedures and not for expressing an opinion on the effectiveness of the company's internal control.
This means that while the auditors assess internal controls to plan their audit, they do not provide an independent assessment of how well those controls are working. Prospective Moes Southwest Grill franchisees should understand that the financial statements have been audited for accuracy and fair presentation, but there is no separate assurance about the strength of the company's internal controls over financial reporting.
This is a fairly standard practice in financial audits. The absence of an opinion on internal controls doesn't necessarily indicate a problem, but it does mean that potential franchisees need to rely on other aspects of the FDD and their own due diligence to assess the financial stability and management practices of Moes Southwest Grill. Franchisees may want to ask the franchisor directly about their internal control practices and any recent assessments or improvements made.