What does the auditor evaluate regarding the reasonableness of significant accounting estimates made by iTan's management?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing an audit in accordance with generally accepted auditing standards, 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 iTan Franchising, Inc.'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 financial statements.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, the auditor evaluates the reasonableness of significant accounting estimates made by the management of Itan Franchising, Inc. This evaluation is part of the auditor's broader responsibility to assess the overall presentation of the financial statements. The auditor's objective is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error.
To achieve this, the auditor exercises professional judgment and maintains professional skepticism throughout the audit. They identify and assess the risks of material misstatement, design and perform audit procedures responsive to those risks, and obtain an understanding of internal control relevant to the audit. However, the auditor does not express an opinion on the effectiveness of Itan's internal control.
For a prospective Itan franchisee, this means that an independent auditor has reviewed the financial statements of Itan, including the accounting estimates made by its management. This review provides a level of assurance that the financial statements are presented fairly and in accordance with generally accepted accounting principles. Franchisees can take comfort in knowing that the financial information they are relying on has been scrutinized by an independent party.