What is the auditor's responsibility regarding the maintenance of professional skepticism throughout the audit of iTan?
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.
We are required to communicate with those charged with governance regarding, among other matters the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to the 2025 FDD, the auditor's responsibility is to exercise professional judgment and maintain professional skepticism throughout the audit of iTan's financial statements. This means the auditor must have a questioning mind and critically assess the audit evidence, rather than assuming that management is always honest. This skepticism is crucial for identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error.
The auditor's role includes designing and performing audit procedures that are responsive to the identified risks. These procedures involve examining evidence related to the amounts and disclosures in the financial statements on a test basis. The auditor also needs to understand iTan's internal control system to design appropriate audit procedures, although the audit does not aim to express an opinion on the effectiveness of iTan's internal controls.
Furthermore, the auditor must evaluate the appropriateness of the accounting policies used by iTan's management and the reasonableness of significant accounting estimates. They also need to assess the overall presentation of the financial statements. Ultimately, 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 the planned scope and timing of the audit, significant audit findings, and internal control matters identified during the audit with those in charge of governance.
For a prospective iTan franchisee, this means that the financial statements presented in the FDD have been examined by an independent auditor who has maintained a skeptical and critical approach. This provides a degree of assurance that the financial statements are free from material misstatements, whether due to fraud or error. However, it is important to remember that even with an audit, there is no absolute guarantee that all misstatements will be detected.