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Home / India News / 2009 / August 2009 / August 19, 2009
Government to adopt new norms to nail corporate frauds
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Government to adopt new norms to nail corporate frauds

After failing to detect the Satyam Computer scam, the Ministry of Corporate Affairs is reportedly planning to adopt new norms to nail corporate frauds.


New Delhi, Aug 19 : After failing to detect the Satyam Computer scam, the Ministry of Corporate Affairs is reportedly planning to adopt new norms to nail corporate frauds.

The proposed system would include sending out alert signals if discrepancies are found in company books.

Adverse remarks from auditors and changing auditors more than once in three years can bring a company under the fraud scanner, an Indian Express report reveals.

The proposed early warning system (EWS) software would alert officials if a company's quantum of related-party transactions is more than five per cent of domestic sales, or 50 per cent or more directors resign in one year, or earning per share fluctuates more than 25 per cent compared with the previous year.

Not only will listed or large companies come under scrutiny, but also unlisted and smaller firms, sources said.

Various risk factors such as not filing annual accounts for two years, share application money remaining unallotted for more than a year, complaints received from shareholders against the affairs of the company, occurrence of losses if there has been profit in the last two years, continuous increase in capital-work-in-progress for three consecutive years will be recognised by the software.

Once the relevant information is entered into the EWS, it will calculate the risk.

The ministry says it will also continue to depend on media reports, the Directorate of Revenue Intelligence (DRI), the Central Bureau of Investigation (CBI), and the Securities and Exchange Board of India (SEBI), and the Income Tax Department to gather information about the affairs of companies.

ANI

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