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Govt's Software Detects 160 Corporate Frauds
si Team
Monday, March 29, 2010
It was only after the Satyam fiasco that the government became more conscious about the corporate scams. It led the Ministry of Corporate Affairs in implementing a software based system to detect corporate scam. The early warning system (EWS), implemented by the ministry, has now detected irregularities in 160 companies, out of which 30 are government undertakings. The government has never detected such corruptions at early stages before.

The sources say that the EWS has detected discrepancies like fund diversions in its own subsidiaries as well as other firms, irregularities in filing balance sheets and asset liability variance. “There are some blue-chip companies against which the EWS has given out alerts and we are also carrying out inspections, both invasive and non-invasive, of their books as per Sections 209 and 234 of the Companies Act,” an official source discloses without revealing the names of the companies.

The Registrar of Companies will inspect the 130 companies based on the preliminary findings of the EWS and the Comptroller and Auditor General will handle the complaints regarding the 30 Public Service Undertakings, says the official.
The software based scam detecting system incorporated 10 financial parameters set by the ministry for diagnosing problems in companies. The software focuses on detecting the diversion of public money by companies within their own concerns or elsewhere. With the early warning system, unusual developments are looked into by scrutinizing the quarterly results of companies, their public announcements, filings with exchanges, tax returns, and media reports among others.

The objective of the EWS is to develop a permanent system for scanning every company. The system monitors the information, which the public has the right to know and which are in the public domain and can give indications of performance. The system also monitors people’s judgment in the market place, says the official source. The scrutiny mechanism worked out by the ministry will detect non-compliance and non-disclosure by companies. It also monitors the utilization of the money raised by the companies from the public and assess if the utility matches with the IPO prospectus.
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