| Topic : Financial Audit: Challenges and Opportunities |
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Finance & Accounts |
Banking & Insurance Professionals |
Financial Asset management |
1 more ...
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Activity:
1 comments
590 views
last activity : 07 06 2010 20:18:04 +0000
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In a bid to crack down on closely guarded corporate frauds in early stages, the ministry of corporate affairs has kick-started its early warning system on company frauds, with initially about 50 companies coming under the government’s radar.
The early warning system, which has been set up through the use of a sophisticated computer network and involves the functioning of multiple regulators including SEBI and various departments under the corporate affairs ministry, has been started off on a pilot project basis, before being extended to cover all companies operating in the country.
The initiative, which was mulled early last year, gained speed after after the emergence of the multi-crore financial fraud in the erstwhile Satyam Computer Services. The scam went untraced for seven years before its promoter B Ramalinga Raju decided to confess of wrongdoings in the company.
The early warning system involves active participation of capital markets regulator SEBI, and will keep a watch on activities of companies. The purpose is to crack on any suspicious corporate activity that is being carried out, thus reducing the extent of damage it may cause if it is allowed to reach an uncontrollable level. Once it tracks any suspected malfunctioning, the government will attempt to rectify it through proper regualtion.
The government is already working on a pilot project comprising with 50 companies, and the experience gained during the operation of the pilot project will be used to fine tune the system and give it a final shape. The pilot project aims at finding out the limits up to which the government can seek information from companies that have suspected area of operation.
With the new system in place, the government will look for unusual developments in a company’s financial operations and decision making process by scrutinising quarterly results of companies, their public announcements, filings with stock exchanges, tax returns and media reports. Even as the ministry mulled the setting up of an early warning system on corporate frauds last year, the project gained speed.
So what are your views guys, will this Early warning system be able to keep a check on corporate frauds?
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