What is the auditor's responsibility regarding the financial statements of Potbelly Sandwich Works?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
To the stockholders and the Board of Directors of Potbelly Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Potbelly Corporation and subsidiaries (the "Company") as of December 29, 2024, and December 31, 2023, the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 29, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2024, and December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2024, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 6, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment of Long-Lived Assets—Refer to Note 2 to the financial statements
Critical Audit Matter Description
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 37–49)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, the auditor's responsibility is to express an opinion on the company's financial statements based on their audits. The audit is conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). These standards require the auditor to plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement, whether due to error or fraud.
The audit procedures include assessing the risks of material misstatement, examining evidence regarding the amounts and disclosures in the financial statements on a test basis, evaluating the accounting principles used, and assessing significant estimates made by management. The auditor also evaluates the overall presentation of the financial statements. The auditor's opinion confirms whether the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Potbelly Sandwich Works in conformity with accounting principles generally accepted in the United States of America.
Furthermore, the auditor has also audited Potbelly Sandwich Works's internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The auditor's report, dated March 6, 2025, expresses an unqualified opinion on the company's internal control over financial reporting. This indicates that the auditor believes Potbelly Sandwich Works maintained effective internal control over financial reporting as of that date.
One critical audit matter identified for Potbelly Sandwich Works is the impairment of long-lived assets, specifically property and equipment and right-of-use assets for operating leases. This matter involves especially challenging, subjective, or complex judgments related to assessing potential impairments of these assets at the individual shop level. The auditor's communication of this critical audit matter does not alter their overall opinion on the financial statements but highlights an area requiring significant audit attention.