Preventing corporate fraud

Can early alert systems equipped with artificial intelligence forestall corporate frauds? India’s company regulators—read the ministry of corporate affairs and the registrars of companies under it—will gather the strength and resources to use such systems for many things including prevention of corporate malpractices if the plan of the ministry to unleash the second-generation e-governance programme comes through. According to secretary-corporate affairs, Anurag Goel, MCA-21, the e-governance system that is currently functional would be further buttressed so that regulators could take pre-emptive action, rather than act after malfeasance was writ large on the body corporate and caused practically irredeemable losses to shareholders. He told ET that the idea was to give companies the option to put their financial/business information in the Extensible Business Reporting Language or XBRL that would, apart from greatly facilitating analysis of the information for the companies’ own benefit, also make the job of the regulators easier. This is feasible because XBRL information can be exchanged between computers. Once the company is XBRL-compliant, it will be in a position to make information relating to its corporate social responsibility, compliance with anti-child-labour and environmental norms etc. verifiable and get the Green Company tag that would improve its image before the shareholders, creditors, business partners, customers and other stakeholders, Mr Goel said. “This (XBRL adoption) would be voluntary,” he clarified. (XBRL is defined as dictionary of data definitions which involves a mechanism for describing, naming and classifying items of business information). Recently, the country’s accounting standard setter, the Institute of Chartered Accountants of India (ICAI), has said that it will come out with the first part of XBRL in September. The proposed upgrading of MCA21—a comprehensive e-governance programme that has already made the interaction between companies and regulators much more efficient—would make India the twelfth country in the world to put corporate financial information in the user-friendly XBRL. It will allow hassle-free data mining and effective utilisation of data for research.