The proposed system would include sending out alert signals if discrepancies are found in company books.
Adverse remarks from auditors and changing auditors more than once in three years can bring a company under the fraud scanner, an Indian Express report reveals.
The proposed early warning system (EWS) software would alert officials if a company's quantum of related-party transactions is more than five per cent of domestic sales, or 50 per cent or more directors resign in one year, or earning per share fluctuates more than 25 per cent compared with the previous year.
Not only will listed or large companies come under scrutiny, but also unlisted and smaller firms, sources said.
Various risk factors such as not filing annual accounts for two years, share application money remaining unallotted for more than a year, complaints received from shareholders against the affairs of the company, occurrence of losses if there has been profit in the last two years, continuous increase in capital-work-in-progress for three consecutive years will be recognized by the software.
Once the relevant information is entered into the EWS, it will calculate the risk.
However, the ministry says it will coordinate with media reports, the Directorate of Revenue Intelligence (DRI), the Central Bureau of Investigation (CBI), and the Securities and Exchange Board of India (SEBI), and the Income Tax Department to track company affairs.