What is the auditor's responsibility regarding professional judgment and skepticism during 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 iTan's 2025 Franchise Disclosure Document, the auditor has specific responsibilities regarding professional judgment and skepticism during the audit of iTan's financial statements. The auditor's objectives are to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error, and to issue 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 an audit will always detect a material misstatement.
In conducting the audit, the auditor must exercise professional judgment and maintain professional skepticism throughout the process. This involves identifying and assessing the risks of material misstatement in the financial statements, whether due to fraud or error, and designing and performing 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 is also required to obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate for the circumstances. However, the auditor does not express an opinion on the effectiveness of iTan Franchising, Inc.'s internal control. Additionally, the auditor 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. Finally, the auditor must conclude 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 and communicate the planned scope, timing, significant findings, and internal control matters with those in charge of governance.