What is the auditor's responsibility in obtaining an understanding of internal control relevant to the audit of iTan?

According to Itan's 2025 Franchise Disclosure Document, the auditor's responsibility regarding internal control is to gain an understanding relevant to the audit itself. This understanding is used to design audit procedures that are appropriate for the given circumstances. However, the auditor's role does not extend to expressing an opinion on the effectiveness of Itan Franchising, Inc.'s internal control systems. Therefore, the auditor's report will not include any such opinion.

The auditor's objectives include obtaining reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and issuing an auditor's report that includes their opinion. While reasonable assurance is a high level of assurance, it is not absolute, and 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 of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. These procedures include examining evidence regarding the amounts and disclosures in the financial statements on a test basis. The auditor also evaluates the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements.

Furthermore, the auditor concludes whether there are conditions or events that raise substantial doubt about Itan Franchising, Inc.'s ability to continue as a going concern for a reasonable period of time. The auditor is also 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.