CA Arun, a Chartered Accountant, is conducting the statutory audit of Preeti Textiles Ltd. for the financial year ending March 31, 2025. As part of…

CA Arun, a Chartered Accountant, is conducting the statutory audit of Preeti Textiles Ltd. for the financial year ending March 31, 2025. As part of his professional duty, he is required to express an opinion on whether the financial statements present a true and fair view of the company's financial results and state of affairs. To form his opinion based on the conclusions drawn, CA Arun is adhering to the requirements of SA 500 – “Audit Evidence”, which requires obtaining sufficient appropriate audit evidence. He obtains and assesses relevant information during the audit. This information includes: Reviewing the company's General Ledger and Journal Entries.Examining supplier invoices and contracts for major purchases.Scrutinizing work sheets used by finance team for calculating depreciation expense.Reading minutes of the Board of Directors' meetings.Inspecting documented internal control manual for sales process. The auditor acknowledges that judgments arising from a negligent examination may lead to legal consequences and adversely affect his professional reputation. Accordingly, he conducts his examination with utmost objectivity, analytical rigor, and thoroughness. As at 31st March 2025, Preeti Textiles Ltd. reported a trade receivables balance of 45 crore. During the course of the statutory audit, the auditor, CA Arun, decided to employ direct confirmation procedures to verify the existence and accuracy of the trade receivables. The management requests CA Arun not to seek confirmation from two overseas customers, citing ongoing disputes and confidentiality clauses in export contracts. He evaluates this request and decides to apply alternative audit procedures, such as verifying subsequent receipts and reviewing correspondence for these balances. While auditing travel expenses, the auditor observed several travel bills submitted by a director for foreign trips undertaken with family members during the festival period. The company had reimbursed entire amount, classifying it under “Business Promotion Expenses.” Based on above, answer the following MCQs (1-5):