CA Ravi is the engagement partner of PQR Ltd. for conducting the Statutory audit for the FY 2025-26. During the audit of PQR Ltd., he had the…

(i) Whether the given matters constitute significant findings requiring communication to TCWG: As per SA 260 “Communication with Those Charged with Governance”, the auditor is required to communicate the following matters: The auditor shall communicate with those charged with governance the auditor's views about significant qualitative aspects of the entity's accounting practices, including accounting policies, accounting estimates and financial statement disclosures. When applicable, the auditor shall explain to those charged with governance why the auditor considers a significant accounting practice, that is acceptable under the applicable financial reporting framework, not to be most appropriate to the particular circumstances of the entity. In this case, Management used a discount rate of 12% instead of 8%, resulting in understatement of recoverable amount by 2crore; and overstatement of impairment loss. Use of an outdated discount rate indicates deficiency in management's estimation process and affects the appropriateness of accounting estimates. The incorrect discount rate resulted in a 2crore overstatement of impairment loss/understatement of recoverable amount. Such a material error is a significant audit finding. Therefore, the inappropriate use of outdated discount rate constitutes a significant audit finding that must be communicated to TCWG under SA 260.The auditor shall communicate with those charged with governance significant difficulties, if any, encountered during the audit. Management delayed providing inventory records for 10 days, causing extensive extra effort to the auditor. This also constitutes a significant finding requiring communication to TCWG under SA 260. (ii) Other significant findings that an auditor should communicate to "Those charged with governance": Unless all of those charged with governance are involved in managing the entity: -Significant matters arising during the audit that were discussed, or subject to correspondence, with management;Written representations the auditor is requesting;Circumstances that affect the form and content of the auditor's report, if any andAny other significant matters arising during the audit that, in the auditor's professional judgment, are relevant to the oversight of the financial reporting process.