Great Point Ltd., a software development company, has been under pressure to meet aggressive market expectations for revenue growth. For the…

Great Point Ltd., a software development company, has been under pressure to meet aggressive market expectations for revenue growth. For the Financial Year ended March 31, 2025, Great Point Ltd. reported a 25% increase in net profit, mainly attributed to a substantial increase in licensing revenue from a few large contracts signed in the last quarter. During the audit planning phase, CA R, a member of the audit team, observed that the CEO and CFO are entitled to significant performance bonuses linked directly to the company's reported net income. The audit team focused on the large licensing contracts. They discovered that one significant contract, contributing 15% to the reported revenue, was with a newly established entity, "Alpha Systems," which appeared to be a shell company with no operational history. Further audit procedures revealed that the contract terms allowed Alpha Systems a "right of return" on the software license for any reason within 12 months, and Great Point Ltd.'s sales team had provided a side-letter guaranteeing a full refund if the license was unused. Also, a substantial amount of development expenditure, which should have been expensed in the current period, was improperly capitalized as an intangible asset, significantly overstating the reported profit. The auditor concluded that if inappropriate revenue recognition (due to the right of return and side-letter) and the incorrect capitalization of expenditure are not corrected, these would give rise to risks of material misstatement that are pervasive to the financial statements as a whole and may affect multiple assertions. The preliminary risk assessment suggested a high risk of material misstatement due to management override of controls and aggressive accounting policies. Based on above, answer the following MCQs (10-12):