The extract of the financial statements of Nex Limited for the financial year 2023-24 is as follows: Particulars Rupees (in Crores) Trade Receivable…

In the present case, CA Yash is unable to obtain sufficient and appropriate audit evidence with respect to the following: i. The balance confirmation with respect to debtors amounting to 175 crores are not available. Further there has been default in payment by the debtors and the provision so made is not adequate. The audit team is also unable to ascertain the carrying value of trade receivables. ii. With respect to 45% of the company's inventory, neither the physical verification has been done by the management nor adequate inventory records are maintained. The audit team is also unable to undertake the physical inventory count as such the value of inventory could not be verified. In the above two circumstances the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. Thus, CA Yash should give a Disclaimer of Opinion. The relevant extract of the Disclaimer of Opinion Paragraph and Basis for Disclaimer of Opinion paragraph is as under: Disclaimer of Opinion We do not express an opinion on the accompanying financial statements of Nex Ltd. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements. Basis for Disclaimer of Opinion We are unable to obtain balance confirmation with respect to the debtors amounting to 175 crore. Further, there have been defaults on the payment obligations by debtors on the due dates during the year under audit. The company has created a provision for doubtful debts of 50crore during the year under audit which is inadequate in the circumstances of the company. The carrying value of trade receivables could not be ascertained. Further, in respect of inventories (which constitute 45% of the total assets of the company), during the reporting period, the management has not undertaken physical verification of inventories at periodic intervals. Also, the company has not maintained adequate inventory records at the factory. We were unable to undertake the physical inventory count and as such the value of inventory could not be verified.