Aarav Agro Products Limited is a public company engaged in manufacturing edible oil and has been in this business for 22 years. Its financial…

Aarav Agro Products Limited is a public company engaged in manufacturing edible oil and has been in this business for 22 years. Its financial results for FY 2024-25 were: S. No. Particulars Amount 1. Aggregate outstanding loans, debentures and deposits ₹ 14 crore 2. Turnover ₹ 120 crore 3. Paid-up capital ₹ 60 crore 4. Net Profit (after tax) ₹ 6 crore For FY 2024-25, M/s Rohan & Associates were the statutory auditors. They identified significant internal control deficiencies and misstatements in Trade Payables and consequently issued a qualified audit report. For FY 2025-26, the Board recommended Ms. Kavya as the statutory auditor to the members of the Company, as the management did not wish to re-appoint the previous auditors. After reviewing the previous year's financial statements and audit report, Ms. Kavya identified understatement of Trade Payables balance as a significant audit risk. She determined materiality at ₹ 18,00,000 for conducting the audit of the year 2025-26. While selecting samples for Vendor Balance Reconciliations, she considered: (i) Major vendors where confirmation balances agree with the General Ledger. (ii) Vendors having high-volume transactions with Aarav Agro Products Limited. (iii) Vendors with balances of ₹ 18,00,000 or more outstanding at the year-end. (iv) Vendors with balances of less than ₹ 18,00,000 outstanding at the year-end. As at March 31, 2026, the balances of two vendors as per company's General Ledger and as per External Confirmation were as follows: Vendor Name Balance as per General Ledger Balance as per External Confirmation Meera Groundnut Suppliers Limited ₹ 18,00,000 ₹ 24,00,000 Surya Sunflower Seeds Limited ₹ 72,00,000 ₹ 90,00,000 Meera Groundnut Suppliers Limited: The difference in the balance is due to one of the orders received by the Company. This order relates to a disputed consignment wherein the Company claims that the received raw material is of sub-standard quality, which was returned to the vendor on March 29, 2026. Surya Sunflower Seeds Limited: The difference relates to two invoices of ₹ 12,00,000 and ₹ 6,00,000, dated March 22 and March 26, 2026 respectively. The Accounts Payable Executive stated that both invoices were received on April 4, 2026 and were therefore not recorded as at March 31, 2026. Ms. Kavya selected samples to verify Trade Payable balances covering approximately 25% of the population. During the audit, she came across two errors aggregating to ₹14,00,000: ₹ 5,00,000 due to an invoice not being recorded because of ineffective controls; and ₹ 9,00,000 due to a clerical error by Mr. Arjun, who came as temporary replacement of permanent accountant, Ms. Neha, for one week. Based on the above facts, answer the following MCQs: