When auditing Remax's 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.
- 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 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.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
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 in accordance with Generally Accepted Auditing Standards (GAAS). As part of this process, the auditors gain an understanding of internal controls relevant to the audit to design appropriate audit procedures. However, this understanding is specifically not for the purpose of forming an opinion on the effectiveness of Remax's internal control.
Instead, the auditors' responsibilities include identifying and assessing the risks of material misstatement in the financial statements, evaluating the appropriateness of accounting policies, and assessing the reasonableness of significant accounting estimates made by management. They also evaluate the overall presentation of the financial statements and conclude whether there are conditions that raise substantial doubt about the company's ability to continue as a going concern.
While the auditors do not express an opinion on the effectiveness of internal controls, they are required to communicate with those charged with governance regarding the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters identified during the audit. This communication ensures that relevant parties are informed of any significant issues discovered during the audit process, even if a formal opinion on internal control effectiveness is not provided.