What is the auditor's responsibility regarding 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.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate that raise substantial doubt about iTan Franchising, Inc.'s ability to continue as a going concern for a reasonable period of time.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, the auditor has specific responsibilities regarding the audit of Itan's financial statements. These responsibilities include evaluating the reasonableness of significant accounting estimates made by Itan's management. This evaluation is part of a broader effort to ensure that the financial statements are free from material misstatement, whether due to fraud or error. The auditor's objective is to obtain reasonable assurance about the overall accuracy and reliability of the financial statements.
In performing the audit, the auditor must exercise professional judgment and maintain professional skepticism. They identify and assess the risks of material misstatement, and design 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 obtains an understanding of internal control relevant to the audit, although they do not express an opinion on the effectiveness of Itan's internal control.
The auditor's evaluation extends to the appropriateness of the accounting policies used by management, as well as the overall presentation of the financial statements. Furthermore, the auditor must conclude whether there are conditions or events that raise substantial doubt about Itan's ability to continue as a going concern. The auditor is also required to communicate with those charged with governance regarding the scope and timing of the audit, significant audit findings, and certain internal control related matters identified during the audit.