A & Co.

A & Co. has been engaged under SRE 2400 (Revised) to review the financial statements of Zenith Ltd. for the year ended 31 March 2027.

During the review, the practitioner identifies that the company has not recognised a provision of ₹2.8 crore relating to a pending litigation.

Management agrees that the provision should be recognised and revises the financial statements accordingly.

However, during the review of the revised financial statements, A & Co. identifies another matter:

The company has failed to disclose a related-party transaction in accordance with the applicable financial reporting framework. Management refuses to make the required disclosure.

A & Co. concludes that the omission is material but not pervasive to the financial statements.

The engagement partner makes the following statements:

Statement 1: Since the first misstatement was corrected by management, the practitioner does not need to consider it further while forming the conclusion.

Statement 2: The uncorrected related-party disclosure omission may result in a qualified opinion if the practitioner concludes that the effect is material but not pervasive.

Statement 3: Since SRE 2400 is a limited-assurance engagement, the practitioner must express an adverse conclusion whenever management refuses to correct a material misstatement.

Statement 4: The practitioner is required to accumulate misstatements identified during the review and evaluate their effect on the financial statements before forming the conclusion.

Which ONE of the following is correct?

A. Statements 1 and 4 only.

B. Statements 2 and 3 only.

C. Statements 1, 2 and 4 only.

D. Statement 4 only.