Innovate Robotics Pvt. Ltd. (IRPL) engaged in the business of manufacturing advanced robotic machinery and developing proprietary automation…

Innovate Robotics Pvt. Ltd. (IRPL) engaged in the business of manufacturing advanced robotic machinery and developing proprietary automation software appointed M/s Gaur & Associates, Chartered Accountants, as the statutory auditor for the financial year 2024-25. The financial highlights of IRPL for the year were as follows: Particulars Balance as at 31 st March 2024 Total Turnover (Previous Year:85 crores) 120 crores Borrowings from banks and financial institutions 35 crores Paid-up Share Capital 20 crores Profit Before Tax 15 crores During the audit, Engagement Partner CA. Gaurav and his team observed the various issues which are given as under: (i) While conducting substantive procedures, the audit team noticed a significant increase in sales during the last quarter of the financial year. A major portion of this increase, amounting to 8 crores, was attributed to sales made to a new customer, TechSynergy Solutions Pvt. Ltd., which was incorporated on 1st October, 2024. The audit team's inquiries revealed that the payment for these sales was received on 5th April, 2025, just before the audit commenced. Upon further investigation, Anjali, an audit assistant, discovered that one of the directors of TechSynergy Solutions was the husband of the daughter of IRPL's Chief Financial Officer (CFO), Mr. Alok. When CA. Gaurav brought this information to Mr. Alok's attention, the CFO dismissed it as a mere coincidence and insisted that the transaction was conducted at arm's length. He also argued that since the payment was fully received, there was no risk of a misstatement. Management also refused to disclose this relationship in the financial statements, contending that it was not a related party transaction as per the applicable financial reporting framework, and that doing so would unnecessarily complicate matters. It was also observed that approval by way of resolution was also not obtained by management before entering into the contract with TechSynergy for sale of goods. (ii) During the physical verification of Property, Plant, and Equipment (PPE), the audit team & management could not locate a highly specialised robotic arm, which was recorded in the fixed asset register with a written down value of 2.5 crores. Later, management provided a verbal explanation that the asset had been sent to a facility in Germany for immediate calibration in February 2025 and was in transit. However, they failed to provide any supporting documentation such as gate pass, dispatch challan, or insurance documentation for this movement. This matter remained unresolved at the time of finalisation of the audit report. (iii) IRPL holds 60% equity shares in a subsidiary, AutoBots Ltd. The statutory auditors of AutoBots Ltd., in their audit report for FY 2024–25, expressed a qualified opinion due to non-provision of doubtful debts amounting to 1.5 crores, which the auditor considered materially misstated. During the final phase of the audit, on 15th April 2025, IRPL's CEO offered a position of 'Head of Software Development' to CA. Gaurav's wife, a highly qualified software engineer. CA. Gaurav subsequently discovered that his father purchased 1,00,000 equity shares of 10 each in AutoBots Ltd., a subsidiary of IRPL on 27th June, 2025 i.e., after issuance of audit report. The total paid-up capital of AutoBots Ltd. is 5 crores. In the final meeting on 25th April 2025, IRPL's management strongly contended that the unresolved matters were minor in the context of their overall profitable operations. They urged CA. Gaurav to issue an unmodified audit opinion, warning that any modification could jeopardize a crucial funding deal for the company. Based on the above facts, answer the following: