Satyam Scandal

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4. Parties responsible for Satyam Scandal:

From my point of view Auditors & The management system of Satyam are responsible than any other parties for Satyam scandal because:

Auditors are responsible:

Additionally, the Satyam fraud went on for a number of years and involved both the manipulation of balance sheets and income statements. Whenever Satyam needed more income to meet analyst estimates, it simply created ‘fictitious’ sources and it did so numerous times, without the auditors discovering the fraud. Suspiciously, Satyam also paid PwC twice what other firms would charge for the audit, which raises questions about whether PwC was complicit in the fraud. Furthermore, PwC audited the company for nearly 9 years and did not uncover the fraud, whereas Merrill Lynch discovered the fraud as part of its due diligence in merely 10 days. Missing these “red-flags” implied either that the auditors were grossly inept or in collusion with the company in committing the fraud. PWC initially asserted that it performed all of the company's audits in accordance with applicable auditing standards.

Management system:

Numerous factored contributed to the Satyam fraud. The independent board members of Satyam,

the institutional investor community, the SEBI, retail investors, and the external auditor—none of them, including professional investors with detailed information and models available to them,

detected the malfeasance. The following is a list of factors that contributed to the fraud: greed,

ambitious corporate growth, deceptive reporting practices—lack of transparency, excessive

interest in maintaining stock prices, executive incentives, stock market expectations, nature of

accounting rules, ESOPs issued to those who prepared fake bills, high risk deals that went sour,

audit failures (internal and external), aggressiveness of investment and commercial banks, rating

agencies and investors, weak independent responsibility. As the entire management system was involved in the scandal.

5. Way to prevent Fraud like Satyam:

The 2009 Satyam scandal in India highlighted the nefarious potential of an improperly governed

corporate leader. As the fallout continues, and the effects were felt throughout the global

economy, the prevailing hope is that some good can come from the scandal in terms of lessons

learned (Behan, 2009). Here are some lessons learned from the Satyam Scandal:

- Investigate All Inaccuracies: The fraud scheme at Satyam started very small, eventually

Growing into $276 million white-elephant in the room. Indeed, a lot of fraud schemes initially start out small, with the perpetrator thinking that small changes here and there would not make a big difference, and is less likely to be detected. This sends a message to a lot of companies: if your accounts are not balancing, or if something seems inaccurate (even just a tiny bit), it is worth investigating. Dividing responsibilities across a team of people makes it easier to detect irregularities or misappropriated funds.

- Corporate Governance needs to be stronger: The Satyam case is just another example

Supporting the need for stronger CG. All public-companies must be careful when selecting executives and top-level managers. These are the people who set the tone for the company: if there is corruption at the top, it is bound to trickle-down. Also, separate the role of CEO and Chairman of the Board. Splitting up the roles, thus, helps avoid situations like the one at Satyam.

- Increasing moral value: It is universally accepted that “lasting solutions can be found

By transforming human consciousness through an inner discipline and higher moral reasoning.” An integrated, value based vision of leadership and ‘effective’ governance will go a long-way in creating “good” CG. A transformed organizational culture, which pays highest attention to ethical conduct and moral values, will strengthen sustainable roots of the company.

- Transparency and effective auditing: regulatory checks, through internal and external

Auditors and monitoring agencies, will also help to establish long-lasting credibility for a company.

6. If I was the chief financial officer at Satyam:

“Honesty Is The Best Policy”

So if I was the chief financial officer at Satyam I would choose the path of Honesty. As I know that if I want & try to avoid scandal the company would bankrupt or I would lose job but I would do differently. I would audit the transaction perfectly, find out the difference between actual and fake assets and liabilities.

Because many people are depend on these company and they would be victim. Some of the main victims:

- Employees of Satyam spent anxious moments and sleep-less nights as they faced non‐

payment of salaries, project cancellations, layoffs and equally-bleak prospects of outside employment opportunities. They were stranded in many ways: morally, financially, legally, and socially.

- Clients of Satyam expressed loss of trust and reviewed their contracts, preferring to

growth other competitors. Several global clients, like Cisco, Telstra and World Bank cancelled their contracts with the Satyam. “Customers were shocked and worried about the project continuity, confidentiality and cost overrun.”

- Shareholders lost their valuable investments and there was doubt about revival of India,

As a preferred investment destination. The VC and MD of Mahindra, in a statement, said that the development had “resulted in incalculable and unjustifiable damage to Brand India and Brand-IT, in particular.”

- Bankers were concerned about recovery