'New Companies Act will prevent more Satyams'

'New Companies Act will prevent more Satyams'

Thursday, 26 February 2009, 03:16 Hrs   |    1 Comments
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New Delhi: Corporate Affairs Minister P.C. Gupta Wednesday said once the revised Companies Act becomes law, it would provide more teeth to investigating agencies that probe corporate fraud.

Replying to a debate in the Lok Sabha on the Satyam scam, the minister said the new Act provided for strengthening investigating agencies like the Special Fraud Investigation Organisation (SFIO), setting up of special courts to ensure speedier trials, and adoption of new accounting standards to prevent collusion between auditors and clients.

"The revision of Companies Act 1956 bill has been placed in the house and is pending with the standing committee," said Gupta.

The opposition was up in arms, saying the lack of regulation was the reason the $1.43-billion Satyam accounting scam occurred, and the manner in which Satyam's present chief executive A.S. Murty sold equity in the company days before the fraud was admitted by company founder B. Ramalinga Raju.

Gupta sought to assuage frayed tempers, saying: "Action taken by government has been appreciated by everybody, everywhere including publications like Financial Times in London."

Opposition members also wanted a thorough probe into the possible involvement of the top political brass of Andhra Pradesh, especially as two companies promoted by Raju, Maytas Infra and Maytas Properties, were allotted thousands of acres of land.

The probe by SFIO into the Satyam scam has been extended to the Maytas companies run by Raju's two sons.

Gupta also said the role of Satyam's former auditors, PriceWaterHouseCoopers, was also being investigated and a show cause notice had been issued to it.

He, however, asked members of the Lok Sabha to not be overtly critical. "I admit that it is an unfortunate incident. But if we ridicule our system to this extent, it will collapse."
Source: IANS
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Reader's comments(1)
1: As business models get more complex, fraud also becomes more sophisticated. Regulatory agencies' staff need better training and incentives to look for fraud more aggressively.Officers should be given bonus payments from money recovered from tax evaders and fraudsters. Industry associations like the CII and Chambers need to support this initiative.
Posted by:Adam smith - 26 Feb, 2009