AT Solutions Ltd. (ATS) is a rapidly growing, unlisted tech company specializing in providing cloud-based software services. The company was founded…

AT Solutions Ltd. (ATS) is a rapidly growing, unlisted tech company specializing in providing cloud-based software services. The company was founded five years ago by two visionary co-founders, Mr. RV (CEO) and Mr. AG (CTO), who also serve as the key members of Those Charged with Governance (TCWG). CA RM is the Engagement Partner for the audit of ATS for the financial year ending March 31, 2025. Your firm, RM & Associates, has been the statutory auditors for the last three years. During the audit, your team encounters the following key issues and observations: ATS earns revenue primarily through subscription services. A new policy was implemented in the current year, effective from April 1st, 2024, to recognize revenue from multi-year contracts on an accelerated basis in the initial year, deviating from the previous practice of straight-line recognition over the contract period. This change was not communicated to your firm beforehand and resulted in a significant overstatement of current year revenue by 4 crores, which is both material and pervasive amount to the financial statements. The company's previous policy was in line with applicable accounting standards. When you raise this matter with the management, they insist that the new policy better reflects the value derived from the initial customer onboarding efforts. The management refuses to revert to the previous policy.ATS holds a small amount of physical inventory, consisting of specialized server components. The physical verification was conducted by the company's internal team on March 31, 2025. However, the auditor was not able to observe the stock count due to a last-minute travel restriction on the audit team. Upon inquiry, the management provides a signed stock count sheet and a video recording of the count. Your team performs alternative procedures, including inspecting subsequent sales invoices and conducting a review of the inventory movement records. The inventory balance is 24 lakhs, which is not material to the financial statements.Your team identified a significant transaction where ATS provided a loan of 20 crores to a subsidiary company, "ABC Solutions Pvt. Ltd.", which is a related party. The transaction was approved by the board but was not adequately disclosed in the draft financial statements. When confronted, the management explained that since both the companies have common ownership and control, they did not deem it necessary to disclose the transaction, believing it was an internal matter.A former employee has filed a significant lawsuit against ATS, claiming intellectual property theft. The claim amount is 6 crores, and the legal counsel has advised the company that the outcome is highly uncertain, but a potential liability cannot be ruled out. The management has provided a contingent liability note in the draft financial statements, but it only mentions the lawsuit without quantifying the potential financial impact or detailing the nature of the claim, stating that they do not want to alarm potential investors. Your firm recently hired a new articled assistant, Mr. A, who is a close relative of the CFO of ATS. Mr. A was initially assigned to the audit engagement. This relationship was not disclosed by the audit firm, and the firm's quality control procedures failed to identify this potential threat to independence. The engagement partner, CA RM, only became aware of this fact during the final review meeting. The audit fieldwork is complete. However, CA RM has applied the appropriate safeguards. Based on the above facts, answer the following Q. Nos. 1 to 6 by choosing the most appropriate option: