Two questions are involved in his every conclusion, conviction, decision, choice or claim: What do I know?—and: How do I know it?
It is the task of epistemology to provide the answer to the “How?”—which then enables the special sciences to provide the answers to the “What?”
Epistemology, according to Rand, tells us how we know? But how does epistemology know how we know? What gives epistemology its special authority to answer such a question? Rand never thinks to raise this query, let alone answer it. Yet it's a question that cuts to the very heart of Rand's epistemological project. It's a question Rand herself could never have answered, because her epistemology, as she conceived and practiced it, is a fraud.
If you examine IOTE critically, one thing becomes readily apparent: it is largely made up of unsubstantiated assertions. For example:
In the history of philosophy—with some very rare exceptions—epistemological theories have consisted of attempts to escape one or the other of the two fundamental questions which cannot be escaped. Men have been taught either that knowledge is impossible (skepticism) or that it is available without effort (mysticism). [78-79]
The higher animals are able to perceive entities, motions, attributes, and certain numbers of entities. But what an animal cannot perform is the process of abstraction—of mentally separating attributes, motions or numbers from entities. It has been said [by whom?] that an animal can perceive two oranges or two potatoes, but cannot grasp the concept “two.” 
Let us now examine the process of forming the simplest concept, the concept of a single attribute (chronologically, this is not the first concept that a child would grasp; but it is the simplest one epistemologically)—for instance, the concept “length.” If a child considers a match, a pencil and a stick, he observes that length is the attribute they have in common, but their specific lengths differ. The difference is one of measurement. In order to form the concept “length,” the child’s mind retains the attribute and omits its particular measurements. 
If you try to find evidence for these various assertions either within IOTE (or anywhere else), you will come up empty. We find Rand making assertions about the thinking processes not only of adult human beings, but even animals and children. How does she know about such things? Can she read the minds of other people? Can she read the minds of children and animals? What is the epistemological warrant for her assertions about these matters of fact? How does she know that an animal cannot grasp the concept "two"? How does she know how a child forms the concept "length"? What evidence does she have on behalf of her assertion that most epistemological theories have taught either that knowledge is impossible or effortless? If anyone else made these sort of unsubstantiated statements, wouldn't Rand (or at least Peikoff) accuse that individual of uttering arbitrary assertions?
When I accuse the Objectivist epistemology of being speculative and imaginary, it's Rand's "arbitrary" and unsubstantiated assertions that I have in mind. But Rand herself almost certainly did not regard her epistemology as arbitrary and unsubstantiated. What could she have said in defense of her epistemological claims?
Rand refused to allow herself to be effectively challenged on the grounds of evidence. She regarded all challenges as hostile attacks by enemies. They were to be combatted, not with rational arguments, but with moral indignation and fierce denouncements. If we were to somehow circumvent the defense mechanisms in which Rand's epistemological arguments are encased, Rand could only have defended her theory by an appeal to introspection. Unfortunately, Rand did not have much to say about introspection. When she discusses it at all it is usually in relation to self-knowledge about emotions. She seems to have believed that through introspection one could learn not only what one feels, but why one feels it. She defined introspection as follows: "Introspection is a process of cognition directed inward—a process of apprehending one’s own psychological actions in regard to some existent(s) of the external world, such actions as thinking, feeling, reminiscing, etc." Although this is rather vague, it does seem to include thinking, which would be the subject matter of epistemology. So it is reasonable to assume that Rand believed that epistemological knowledge could be achieved via introspection. Since Rand wrote so little about this, it's not clear exactly how much she believed could be observed through introspection. How much of IOTE is based on direct introspection, and how much is merely inferred from introspection? She never says.
There are at least two objections that can be raised to the presumption that epistemological knowledge can be gathered through introspection: (1) since the individual can only observe his own mind, how can he be sure that what is true of his mind is true of other minds? and (2) most cognition takes place below the threshold of consciousness and is not available to introspection.
(1) The first objection may seem trivial or overly skeptical; but it won't do to dismiss it out of hand. An Objectivist once boasted in my presence that all his concepts had been formed consciously. Now while I regard such a view as palpably delusional, I can hardly prove it so, since I have no direct access to this person's mind. Rand herself appears to have believed that her own powers of introspection dwarfed those of most other people "Man’s consciousness is his least known and most abused vital organ," she once asserted. Of course, she's referring here to people in general, not to herself. Rand's own powers of introspection enabled her not merely to solve the problem of universals, but to know the exact source of all her emotions. Since no one beyond Rand herself had access to her mind, we have no choice but to take her word on this one.
In IOTE, Rand makes quite a few ex cathedra assertions respecting how human beings form concepts. Even assuming (per impossible) that Rand gleaned information from observing her own mental processes (via introspection), how does she know that other people form concepts the same way? After all, she cannot introspect the mental processes of other people. Perhaps they form concepts using different, even better methods!
At this point, one can imagine an Objectivist responding along the following lines: "Ayn Rand never claimed how other people form their concepts. She merely explained how people ought to form their concepts, if they want their conceptual knowledge to be attached to reality." Even if this accurately describes Rand's position, it hardly gets her in the clear, since it involves an obvious case of question begging. One cannot simply assume that Rand's theory of concept formation describes how individuals ought to form concepts if they want their knowledge to be true or "valid." That assumption must be demonstrated; and to be utterly convincing, it has to be demonstrated empirically, not merely via rationalistic argumentation. If Rand's method of forming concepts is cognitively superior to that used by most other people, you would expect this to give Objectivists a competitive advantage in terms of practical success over people following other schemes of concept-formation. Is this what we find? No, it's not. If you get a list of the most successful scientists, entrepreneurs, doctors, etc., you'll find very few, if any, Objectivists. There is absolutely no evidence that familiarity with IOTE or the Objectivist theory of concept formation improves cognitive efficacy or practical success in business or science. Indeed, you could make the argument that familarity with IOTE impairs cognitive efficacy. After all, the leading Objectivist philosopher (at least according to orthodox Objectivism) still among the living is Leonard Peikoff; the leading Objectivist physicist — David Hariman. Neither individual makes a very good poster boy for the cognitive puissance of Rand's theory of concepts.
(2) I have stressed repeatedly on this site that consciousness is merely the "tip of the iceberg," and that Rand's epistemological claims are unknowable via introspection. The facts upon which Rand's epistemology allegedly rest are not open to introspection. Rand cannot possibly know what she claims to know. Objectivist epistemology is merely a series of guesses of varying degrees of implausibility. It's armchair philosophizing at its very worst. Since most concepts are formed below the threshold of consciousness, attempting to describe how they are formed may in fact be a vain endeavor. There are, to be sure, a few things that can be learned in the lab. In recent decades, cognitive scientists have developed many extremely ingenious experiments, from which they can make plausible inferences about unconscious mental processes. For example, in one experiment, they create an exact, minaturized model of a room, with all the same furniture, doors, windows, etc. They show this model to a toddler. Then they show the toddler a minutarized teddy bear, which they place behind some of the furniture in the minaturized model. They subsequently ask the toddler to find the teddy bear in the real room. Two year olds can never find the teddy bear, because they can't comprehend that the model is a representation of the real room. Four year olds, on the other hand, have no problem finding the teddy bear. Between two and four years of age, children learn the ability to take regard models as representative symbols.
It is through such ingenious experimentations that knowledge of human cognition is advanced. Rand's method of merely imaging how children "ought" to think is of very little purpose. It is tantamount to following the method used by Aristotle in physics. It is an attempt to determine matters of fact through logical, moral, and rhetorical constructions, rather than through the hard work of inference from rigorous experimentation.