Mega Industries Ltd. is a listed company engaged in manufacturing and export of industrial equipments across multiple jurisdictions. For the…

Mega Industries Ltd. is a listed company engaged in manufacturing and export of industrial equipments across multiple jurisdictions. For the financial year ended 31st March 2026, the statutory audit was undertaken by DKS & Co., Chartered Accountants. Considering the complexity of operations, large volume of export transactions, significant foreign currency borrowings and extensive credit sales, the engagement partner classified revenue recognition, trade receivables and foreign currency liabilities as key focus areas of the audit. At the planning stage, the audit team reviewed the annual reports of the company for the previous five financial years, including audited financial statements, directors' reports, management discussion and analysis reports and other published disclosures. The objective was to understand reporting trends, consistency in disclosures, movements in ratios, changes in borrowing patterns and recurring matters affecting the financial statements. During this review, the audit team noticed a substantial increase in export turnover and foreign currency financing during the current year. Further examination revealed that the company had availed a long-term loan denominated in US Dollars for expansion of its overseas operations. Since the liability remained outstanding as at the year-end, the audit team verified the exchange rate applied by the management and independently recalculated the outstanding liability using the closing exchange rate prescribed under the applicable accounting framework to ensure proper year-end restatement of the liability. In addition, because a substantial portion of sales comprised high-volume credit sales to overseas customers, the auditors considered trade receivables to involve significant risk of material misstatement. To obtain sufficient and appropriate audit evidence regarding the existence and accuracy of receivables, the auditors directly communicated with selected customers and sought confirmation of outstanding balances and transaction details recorded in the books of the company. On the basis of above, answer the following MCQs