01
The challenge
The previous provider was no longer available and the owner expected a quick turnaround. The draft accrual statements showed a related-party receivable of more than $160,000 without support, a charge-off of old receivables that needed a period decision, year-end payables not yet accrued, and franchise fees to test under ASC 606. The FDD also required cash flows and full footnotes.
02
Our approach
- Clear scoping on day one. We explained that the FTC Franchise Rule requires an independent GAAS audit, not a compilation, and set a timeline after the October 15 tax deadline.
- Independence protected. The client resolved its balances and accruals with its own bookkeeper, so the audit team performed no management functions.
- Risk-focused plan. Testing centered on the related-party balance (ASC 850), the charge-off (ASC 250), franchise and transfer fees (ASC 606), royalties and cut-off.
- Third-party evidence. Bank and receivable confirmations, legal and management representation letters, and royalty testing against franchisee sales reports.
- Complete FDD package. Footnotes covered revenue recognition, related parties, concentrations and subsequent events.
03
Results delivered
- Audited FY2025 financial statements and an auditor's report for inclusion in the FDD.
- Opening balances corrected, with related-party and prior-period items presented and disclosed.
- A year-end close checklist so next year's audit starts from clean, accrual-basis books.
- Delivered October 17, 2026; set up to recur annually.
04
Frequently asked questions
Generally yes. The FTC Franchise Rule requires audited GAAP financial statements, with a limited phase-in for new franchisors. Some registration states add their own requirements.
Usually not. If the same firm keeps your books or makes management decisions, its independence as auditor can be impaired.
For a small, well-organized franchisor, typically two to four weeks from a complete package. Unsupported balances and missing accruals add time.
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