When auditing Remax's consolidated financial statements, are auditors required to express an opinion on the effectiveness of the company's internal control?
Remax Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the 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 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.
Source: Item 22 — Contracts (FDD pages 108–334)
What This Means (2025 FDD)
According to the 2025 Remax Franchise Disclosure Document, the auditors are not required to express an opinion on the effectiveness of the company's internal control. The audit is conducted to assess the risk of material misstatement of the financial statements and to design appropriate audit procedures.
The auditors' responsibilities include obtaining an understanding of internal control relevant to the audit. However, this understanding is for the purpose of designing audit procedures and not for expressing an opinion on the effectiveness of Remax's internal control. The document explicitly states that no such opinion is expressed.
This means that while the auditors will review Remax's internal controls to the extent necessary to conduct a thorough audit, they are not providing a separate, formal opinion on whether those controls are effective. This is a standard practice in many audits, as a full assessment of internal control effectiveness requires a different and more extensive scope of work.