Page 217 - CA Final PARAM Digital Book.

Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc., as
required by the applicable accounting standards;”

Therefore, the duty of the auditor, under this clause is to report
• Whether all transactions with the related parties are in compliance with section 177 and
188 of the Companies Act, 2013 (“Act”);
• Whether related party disclosures as required by relevant Accounting Standards (AS
18/IND AS 24, as may be applicable) are disclosed in the financial statements.

Part III – Case Discussion
➢ In the Instant case, MG Associates is a related party and also rendering marketing services to MM
Ltd. in return of Consideration of ₹ 4 Lakhs which is related party transaction. No separate
disclosure has been made in the notes to accounts in this context, which was required to be made.
Part IV Conclusion
➢ In view of above, Auditor shall report under the above clause as under
1. Nature of the related party relationship and the underlying transaction-MG Associates is a
partnership firm in which Director of MM Ltd is also a managing partner, with a profit sharing
ratio of 30 %. Payment of ` 4 Lakhs to MG Associates is a related party transaction.
2. Amount involved is Consideration for the Marketing services rendered by MG Associates (4
Lakhs p.m.) is higher than the arm’s length pricing by 1.50 Lakh p.m. ( 18 Lakhs p.a.)

QNO Cl 15--Non-Cash Transaction (Son of Director) Old Course – (M17R, M17M, N17M, M18M, N19R)
411.000 TITANIUM CNO—CARO.320
RPS Ltd. has entered into non-cash transactions with Mr. Rahul, son of director, which is an arrangement

by which RPS Ltd. is in process to acquire assets for consideration other than cash
Answer Part I -- Relevant Standards & Laws
▪ Clause (xv) of Para 3 of CARO, 2020
▪ Section 192 of the Companies Act, 2013
Part II -- Requirements of Relevant Standards & Laws
➢ Non-cash Transactions with Relative of Director:
As per Clause (xv) of paragraph 3 of CARO, 2020, the auditor is required to report
• “whether the company has entered into any non-cash transactions with directors or
persons connected with him and
• if so, whether the provisions of section 192 of Companies Act, 2013 have been complied
with”.

➢ Section 192 of the Companies Act, 2013
Section 192 of the said Act deals with restriction on non-cash transactions involving directors or
persons connected with them. The section prohibits the company from entering into such types of
arrangements unless it is an arrangement by which the company acquires or is to acquire assets
for consideration other than cash, from such director or person so connected.

Part III – Case Discussion
➢ In the instant case, RPS Ltd. has entered into non-cash transactions with Mr. Rahul, son of director
which is an arrangement by which RPS Ltd. is in process to acquire assets for consideration other
than cash and falls within the meaning of section 192 of Companies Act, 2013.
Part IV – Conclusion
➢ The reporting has to be two-fold.
• first part
It requires the auditor to report on whether the company has entered into any non-cash
transactions with the directors or any persons connected with such director/s.

• Second part
It requires the auditor to report whether the provisions of section 192 of the Act have
been complied with.
Therefore, the second part of the clause becomes reportable only if the answer to the first
part is in affirmative.
In the given situation, RPS Ltd. has entered into non-cash transactions with Mr. Rahul, son

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