What does the auditor consider when determining if misstatements in iTan's financial statements are material?

According to Itan's 2025 Franchise Disclosure Document, the auditor considers misstatements material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. This means the auditor assesses whether any inaccuracies or omissions in Itan's financial statements could potentially mislead someone relying on those statements to make informed decisions.

The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. However, reasonable assurance is not absolute, so there is no guarantee that all material misstatements will be detected. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

In performing the audit, the auditor exercises professional judgment and maintains professional skepticism. They identify and assess the risks of material misstatement, design and perform audit procedures responsive to those risks, and examine evidence regarding the amounts and disclosures in the financial statements. The auditor also obtains an understanding of internal control relevant to the audit, evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, and concludes whether there are conditions or events that raise substantial doubt about Itan's ability to continue as a going concern.