M/s PJ Shrimali & Co., Chartered Accountants, were appointed as the statutory auditors of Pristine Limited. Before commencing the audit, the…

The responsibilities of the auditors that are generally included in an engagement letter in accordance with SA 210 “Agreeing the Terms of Audit Engagements" are as follows: (i) Conducting audit in accordance with Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India (ICAI). These Standards require compliance with ethical requirements. As part of an audit in accordance with SAs, exercise professional judgment and maintain professional skepticism throughout the audit. (ii) Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for auditor's opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (iii) Obtaining 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 the company's internal control. Communicating in writing any significant deficiencies in internal control relevant to the audit of the financial statements that have been identified during the audit. (iv) Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. (v) Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If the auditor concludes that a material uncertainty exists related to going concern, the auditor is required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor's opinion. Such conclusions are based on the audit evidence obtained up to the date of the auditor's report. However, future events or conditions may cause the company to cease to continue as a going concern. (vi) Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (vii) Because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with SAs.