Corporate affairs ministry gears up for early detection of fraud

Corporate affairs ministry gears up for early detection of fraud
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First Published: Fri, Jul 17 2009. 01 07 AM IST

Updated: Fri, Jul 17 2009. 01 07 AM IST
New Delhi: Technology will be at the forefront of efforts by India’s ministry of corporate affairs, or MCA, to detect corporate frauds, said an official at the ministry.
The ministry, according to this person who did not want to be identified, will mine its database of reports filed electronically by companies and their auditors, follow up on public complaints, media reports, and information from whistleblowers to detect corporate frauds early.
MCA has been at the forefront of recent investigations into Satyam Computer Services Ltd, whose founder admitted in January to having fudged the company’s accounts over the years to the tune of at least Rs7,136 crore. Even as these investigations continue, the company’s ownership has changed hands in a deal facilitated by the government, and it is now controlled by Tech Mahindra Ltd and goes by the brand name Mahindra Satyam.
Apart from using technology and following up on reports and complaints, MCA will also try to coordinate better with stock market regulator Securities and Exchange Board of India (Sebi) and banking regulator Reserve Bank of India (RBI), said a second MCA official, who, too, did not want to be identified.
All the new measures are part of MCA 21, the ministry’s e-governance initiative.
“Data mining is a focus area for the next generation MCA 21 programme where we plan to make the best use of technology and data to detect corporate frauds. The National Institute for Smart Government (NISG) is working on a concept paper on how to knit technology with the available data so that the ministry gets best information on every company registered with it,” said the first MCA official.
To be sure, the quality of the e-filings by companies and MCA’s own monitoring of these needs to improve. Pavan Kumar Vijay, managing director of Corporate Professionals (India) Pvt. Ltd, a Delhi-based research outfit dealing with corporate analysis, said: “Over 50% companies today don’t do e-filing. When MCA sends them notices, most often they are returned undelivered. Perhaps the ministry needs to start an operation to plug this loophole. One such move can be publishing defaulters’ lists in newspapers.”
Based in Hyderabad, NISG works with the Union and state governments with their e-governance initiatives.
The first MCA official said NISG would submit the concept paper on new generation MCA 21 before the end of this fiscal year and that the project would be launched sometime next year.
The second official said the ministry would start using the so-called extensible business reporting language (XBRL) in an effort to work closely with Sebi and RBI, which are also migrating to XBRL.
XBRL is an electronic format for communication of business and financial data that is becoming popular around the world. India, too, is working on moving on to XBRL.
While MCA maintains a database of all registered companies, Sebi deals with listed firms and RBI with banks and non-banking finance companies.
“Through e-filing, MCA has obtained a mass database which is available in public domain. So far its use is restricted to getting information on companies. But this data can be productively used for examining and analysing the direction in which companies are moving. XBRL, combined with a sophisticated technology, will further support these objectives,” said Ashok Haldea, former secretary, Institute of Chartered Accountants of India.
The second MCA official said tenders for providing software for MCA 21 would be called for sometime this fiscal year. Currently, the software for MCA 21 is provided by Tata Consultancy Services Ltd.
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First Published: Fri, Jul 17 2009. 01 07 AM IST