Concerned over growing corporate fraud, the government is considering to tighten its Early Warning System (EWS) to scrutinise activities of companies with same addresses and common directors.

The Ministry of Corporate Affairs (MCA) plans to add two more parameters to its software-based fraud detecting system, called Early Warning System (EWS), which scans unusual developments in companies and alerts the Ministry of any possible wrongdoing.

Developed in the aftermath of the Rs 14,000-crore Satyam accounting fraud that came to light in January, 2009, the EWS sends signals if a company is found to be faltering any of the 10 parameters set by the MCA.

"A committee, including Director of the Serious Fraud Investigation Office (SFIO) and Director (Investigations and Inspections) in the MCA, was formed to take a look if any new parameters can be included.

The two suggestions that have come out is too many companies having a common address and a director being on the board of a large number of boards, should be scanned," an MCA official told PTI.

The source added that although the two practices may not necessarily mean that a company is involved in some malpractice, at the same time the fact cannot be ignored that such practices should be watched, "especially in the context of front companies and fund siphoning".

With the EWS, the government scrutinises quarterly results of companies, their public announcements, filings with exchanges, tax returns, media reports, etc, and detect wrong doings.

If a company has more than 5 per cent of domestic sales through related party transaction, or if more than half of its directors have put in their papers in a year, or if there is a discrepancy in earning-per-share ratio, besides other parameters, a company comes in the MCA's radar.