It cannot be emphasized enough. Be sure to read, re-read, and read again, the information provided by IRCC, especially all the instructions in the application form and the guide. For the guide, see:
https://www.canada.ca/en/immigration-refugees-citizenship/services/application/application-forms-guides/guide-0002-application-canadian-citizenship-under-subsection-5-1-adults-18-years-older.html
Both your questions are addressed at some length in the guide.
Of course the guide does not say what explanation YOU should give if you cannot provide all the required documents. For missing passports or travel documents, the correct explanation is the TRUE explanation. No need to elaborate. For a missing passport, just explain why you do not have the passport. After all, it is what it is. A missing passport means there is some relevant evidence missing. I will address this more below.
There are many alternatives available for submitting documentation that proves language ability sufficient to make a complete application (applicants must also prove language ability in person in the interview and knowledge of Canada test). I do not know if it is possible to obtain a copy of an IELTS exam result, but if not, depending on whether any of the other options are available, you may need to again take one of the third-party language tests that IRCC will recognize as sufficient proof. Again,
see the guide for details.
Further observations regarding missing passports:
Whether the failure to have and submit this evidence will have much of an impact on how it goes in processing the citizenship application can VARY, and vary quite a lot, DEPENDING on the details. It can range from very little if any impact, to raising significant concerns triggering RQ-related non-routine processing.
Since passport stamps are a lot, lot less significant these days, a missing passport is not nearly so important as it was several years ago. But it appears that IRCC still puts a bit of weight on seeing ALL passports the applicant has had which possibly could have been used during the applicant's eligibility period.
Since the burden of proof is on the applicant, of course the failure to present all the evidence that IRCC requests can potentially hurt the applicant's case. How much it will affect things DEPENDS on many factors.
Since the burden of proof is on the applicant, the fact that the failure to have this evidence is NOT the applicant's fault does not help much.
Obviously, in contrast, if IRCC suspects the applicant has deliberately made this evidence unavailable, that can hurt. Thus, for example, it can be helpful if in the explanation given the applicant also references verifiable information identifying any official reports about the incident, which is mostly about referencing the police report filed at the time of the loss.
In recent years most reports indicate a missing passport does not usually hurt much if at all. But again, this DEPENDS on multiple factors. Too many and too complicated to attempt enumerating, let alone explaining, the many relevant factors. In a very general sense, however, at least in part it comes down to how big a period of time is affected and whether or not there are other aspects of the applicant's circumstances which in conjunction with a missing passport raise concerns about how accurate and complete the applicant has provided information, especially as to travel history and immigration status in other countries.