Franchisor Audit Services

A franchisor’s financial statement audit is a comprehensive examination of the financial statements and records of a franchisor by an independent auditor. It ensures that the financial statements are accurate, reliable, and comply with relevant accounting standards and regulations.

A financial statement audit is essential for franchisors because it adds credibility and transparency to their financial reporting. It reassures shareholders, potential investors, lenders, and franchisees that the franchisor’s financial statements reflect the true financial position and performance of the business. It is also a compliance requirement: under the FTC Franchise Rule, franchisors must include audited financial statements in Item 21 of their FDD. Texas is not a registration state, but the annual audit and Item 21 requirements, including the auditor’s opinion or consent letter, still apply under federal FTC rules.

A franchisor’s financial statement audit offers several benefits. It enhances the credibility and reliability of financial information, improves confidence among stakeholders, identifies weaknesses in internal controls, and helps to identify and prevent fraudulent activities. It also ensures compliance with accounting standards, regulatory requirements, and franchise agreements.

A franchisor’s financial statement audit is performed by an external, independent CPA firm. These firms have specialized knowledge and experience in auditing financial statements, ensuring objectivity and impartiality in their assessments.

During a franchisor’s financial statement audit, the auditor examines the financial records, transactions, internal controls, and accounting policies of the franchisor. They assess the accuracy of financial statements, identify any material misstatements or irregularities, and provide an opinion on the fairness of the statements.

Generally, auditors recommend conducting an audit annually to ensure accurate and up-to-date financial reporting. Franchisors are also required to have their financial statements audited once a year so they can renew their FDD.

The timeline for a franchisor’s financial statement audit depends on various factors, such as the size and complexity of the business and the scope of the audit. Typically, it can take several weeks to a few months to complete, including planning, fieldwork, testing, and the issuance of the audit report.

Yes. Franchisors offering franchises in the United States must include audited financial statements in their FDD, although new franchisors may qualify for the FTC’s phase-in. Skipping or delaying the audit can hold up FDD renewals and prevent franchise sales until the FDD is updated. It can also undermine the franchisor’s credibility, lead to financial mismanagement, and erode trust among franchisees and other stakeholders, potentially resulting in legal or financial repercussions. Our franchisor audit services help you avoid these risks and stay audit-ready year-round.

Yes. Audited financial statements are included in Item 21 of the FDD, which prospective franchisees must receive at least 14 calendar days before signing a franchise agreement or paying any fees. Franchisees can use audited financial statements to assess the franchisor’s financial health and stability before entering into a franchise agreement.

Our CPA firm specializes in providing affordable franchisor audits by having extensive experience across various industries within the franchise sector, including bars, daycares, restaurants, gyms, and charter schools. We have successfully assisted over 100 franchisors with their audit requirements.

We offer a range of services tailored for franchisors, including:

• Auditing financial statements for inclusion in the Franchise Disclosure Document (FDD).
• Ensuring compliance with revenue recognition standards (ASC 606) specific to the franchise industry.
• Providing comprehensive franchise accounting and bookkeeping services.

Our audit approach is meticulously designed for franchisors, ensuring a streamlined and efficient process. This leads to significantly reduced turnaround times compared to industry peers. We begin by understanding your entity and gathering necessary planning documents, followed by thorough testing of transactions and balances. Before issuing the final report, we make sure all required disclosures are met so the report complies with applicable standards.

Yes, we understand the importance of affordability for franchisors. Our firm offers cost-effective solutions without compromising on the quality and thoroughness of the audit process. We believe in providing high-value services at reasonable rates.