Govt plans system to track corporate fraud

Having failed to detect the Satyam scam, the government has embarked on a new vigilant system to track corporate frauds as part of which it has decided to look into companies whose financials are found to be suspicious. According to an official in the ministry of corporate affairs, the government's new drive would be technology-driven and bank heavily on the MCA21 e-governance programme that is now the main gateway for corporates to file their statutory documents. "This is part of our efforts to have an effective early warning system and the idea is to detect frauds, or any tendency of fraud, early," the official said, adding that pilot work on the project has already been kick started. Giving details of the programme, he said the government plans to involve the regional directorates (RDs) and registrar of companies (RoCs) in the exercise after it gets computer-generated alerts on suspect companies through the e-governance network. "There would be several triggers to generate any suspicion on the activities of a corporate. These include things like unusually-high jump in profits; suspect related-party transactions; and huge amounts of unutilised cash and bank balance," the official said. Once a list of suspect companies is drawn up, these would be looked into by the RDs and the RoCs who would look into their filings and financials further. "However, this would be a non-invasive document verification exercise," the official said, pointing out that there was no intention of hounding the corporate sector.