Campaign Textiles Ltd. is an unlisted textile exporter having operations across three states and exporting mainly to customers in Europe and the…

Campaign Textiles Ltd. is an unlisted textile exporter having operations across three states and exporting mainly to customers in Europe and the Middle East. Kaveri & Associates have been appointed as the statutory auditors of the Company for the financial year 2025-26. During the audit of trade receivables, the audit team selected 40 of the Company's largest customers for external confirmation and sent positive confirmation requests directly to them. Responses confirming the balances were received directly from 25 customers. In respect of the remaining 15 customers, as the responses were not received close to the reporting deadline, CA Rishu, the audit senior forwarded the list of outstanding confirmations to the Company's accounts team and requested them to follow up with the customers and communicate any responses received to the audit team, on the grounds that the Company had a better relationship with these customers. During the overall review of audit differences, the engagement team identified three uncorrected misstatements: ₹ 35 lakh relating to a classification error between revenue and expenses, and ₹ 20 lakh and ₹ 18 lakh respectively arising from the verification of two different expense heads. Each misstatement had been assessed as individually immaterial when identified and, accordingly, had not been included in the summary of uncorrected misstatements maintained by the audit team. The performance materiality for the audit had been determined at ₹ 70 lakh. Subsequent to the balance sheet date but before the date of the auditor's report, the Company was informed that one of its major customers, representing approximately 15% of outstanding trade receivables, had filed for insolvency. The insolvency was attributable to a prolonged liquidity crisis at the customer, which had already existed for several months before the reporting date. Management refused to make any additional provision for the receivable, contending that the insolvency filing occurred after year-end and should therefore be considered only in the subsequent financial year. The engagement partner, however, disagreed with management's view and requested management to reconsider the adequacy of the provision, considering that the condition giving rise to the insolvency existed at the reporting date. Based on the above facts, answer the following MCQs: