PNBM & Associates, Chartered Accountants, is a firm comprising four partners. Chetan, one of its partners, had accepted and signed 68 tax audit…

PNBM & Associates, Chartered Accountants, is a firm comprising four partners. Chetan, one of its partners, had accepted and signed 68 tax audit reports under Section 44AB of the Income-tax Act, 1961, excluding tax audits covered under Sections 44AD, 44ADA and 44AE. When this came to light, Chetan justified his action by stating that since the firm had 4 partners, the firm's aggregate ceiling was 240 tax audits, and therefore any partner could sign more than 60 reports if the firm's overall ceiling was not exceeded. PNBM & Associates also serves as the statutory auditor of Solaris Renewables Ltd., a listed company, for the year ended March 31, 2026. During the course of the audit, the engagement team observed the following matters: (i) CA Priya is employed as the Chief Financial Officer of Solaris Renewables Ltd. During assessment proceedings, she appeared before the Income-tax authorities as the company's authorised representative. Subsequently, a fellow employee of the company, Mr. Karan, asked Priya to represent him in his personal income-tax assessment, and she agreed to do so. (ii) During the audit, the audit team observed that Solaris Renewables Ltd. had early adopted a new Ind AS, which would otherwise become mandatory from April 1, 2027. Such early adoption was permitted under the applicable regulatory framework. The early adoption had a material effect on the financial statements and was adequately disclosed in the notes to accounts. The audit team performed appropriate procedures and concluded that the accounting treatment adopted was appropriate. (iii) As part of the audit of accounts receivable, the firm sent positive confirmation requests to Solaris Renewables Ltd.'s top 60 customers, whose balances represent 70% of total receivables. Positive confirmation requests were also sent to banks to confirm balances held and outstanding loans. In addition, negative confirmation requests were sent to 180 small suppliers with low-value account balances. The following events occurred during the confirmation process: (1) Out of the 60 positive confirmation requests, 15 responses confirmed agreement with the stated balances, 5 responses reported discrepancies, and 40 customers did not respond at all. (2) One of the responses to a positive confirmation appears unreliable due to discrepancies in the customer's letterhead and inconsistent information that did not match the customer's usual correspondence. (3) 120 negative confirmation requests receive no responses. (4) In the case of non-response, the audit team examined subsequent cash receipts/payments, correspondence, and goods received/ dispatch records as alternative evidence.