CARO's clause 3(xv) requires the auditor to report whether the company has entered into any non-cash transactions with directors or persons connected with them, and if so, whether the provisions of Section 192 of the Companies Act have been complied with. Section 192 specifically addresses a company acquiring an asset from a director (or connected person) for consideration other than cash, or the company transferring an asset to a director for non-cash consideration — arrangements like an asset swap, a share allotment in exchange for property, or a company taking over a director's personal asset against an adjustment to their loan account, each requiring prior approval by a resolution of the company (and, where the director is a director of the holding company, approval by the holding company's resolution too).
What actually counts as a non-cash transaction here
| Example | Covered by Section 192 / this clause? |
|---|---|
| A director sells a property to the company for cash at market value | No — this is a cash transaction, addressed instead under Section 188's related-party provisions, not Section 192 |
| A director transfers a property to the company in exchange for shares | Yes — non-cash consideration (shares in exchange for an asset) is exactly what Section 192 covers |
| The company writes off a director's loan in exchange for the director surrendering an asset to the company | Yes — the consideration is the asset surrender, not cash, even though a loan account is involved |
| A director is paid a cash salary and perquisites | No — ordinary remuneration is governed by separate provisions on managerial remuneration, not Section 192 |
What audit review checks
- 01Identify any asset acquired from or transferred to a director or connected person for non-cash consideration during the yearReviewed against board minutes, asset registers, and any changes in director loan account balances that might reflect a non-cash settlement.
- 02Confirm the required resolution was passed before the arrangement, not afterSection 192 requires prior approval — a resolution passed after the transaction has already occurred does not retroactively satisfy the requirement.
- 03Check whether holding company approval was also required and obtainedWhere the director involved is also a director of the company's holding company, the holding company's own shareholders must also approve by resolution.
A non-cash arrangement with a director structured informally through adjusting entries in a loan account, with no resolution ever passed because nobody identified it as falling under Section 192 at all, is exactly the gap this clause is designed to surface — the absence of a formal "asset swap" label doesn't take an arrangement out of scope if its substance is non-cash consideration.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Related parties & disclosuresAuditing loans to directors and connected personsThe riskiest loans to directors are rarely booked as loans. They show up as unsettled expense advances and drifting current-account balances.
- Payroll & employee costDirector remuneration audit under the Companies ActManagerial remuneration limits and approvals, financial statement disclosure, and testing payments against board and shareholder resolutions.
- Related parties & disclosuresSection 188 compliance: what an auditor checksSection 188 approval is a governance fact to verify against minutes, not an assumption to carry forward from last year's file.
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