FINAL PROJECT SUBMISSION ON

CORPORATE ACCOUNTING

Submitted by:
Utkarsh Raghav
Division: A
BBA.LLB.
PRN - 14010224050
2014- 2019
Of
Symbiosis Law School, NOIDA
Symbiosis International University, PUNE
On
March 17, 2015
Submitted to:
Dr. Meenakshi Kaul
Symbiosis Law School, Noida
Symbiosis International University, Pune

CERTIFICATE

The project entitled A Case Study of Satyam Computers

Limited submitted to the Symbiosis Law School, NOIDA for
Corporate Accounting as part of Internal assessment is based on my
original work carried out under the guidance of Dr Meenakshi Kaul from
December to March. The research work has not been submitted elsewhere
for award of any degree.
The material borrowed from other sources and incorporated in the
thesis has been duly acknowledged.
I

understand

that

myself

could

be

held

accountable for plagiarism, if any, detected later on.

Sign: Utkarsh Raghav

Date: 17.03.15

responsible

and

ACKNOWLEDGEMENT
I would like to express our gratitude to Dr. Meenakshi Kaul for the immense
help and support during the making of this research project. Our deepest
thanks to Symbiosis Law School, NOIDA for having created an environment in which we
could study and make our project. Also for providing us with the best of Library and the
Computer Lab facilities.
We thank and appreciate our course in charge Dr. Meenakshi Kaul for guiding us through
the project and for having taken the pain to go through it with attention and care and
making necessary corrections as and where needed.

Utkars
h Raghav

ABSTRACT
Scandals are often the tip of the iceberg. They represent the
visible catastrophic failures. An attempt is made in this paper
to examine indepth and analyze Indias Enron, Satyam
Computers creative accounting scandal. Their scandal/fraud
has put a big question mark on the entire corporate
governance system in India. In public companies, this type of
creative accounting leading to fraud and investigations are,
therefore, launched by the various governmental oversight
agencies. The accounting fraud committed by the founders of
Satyam in 2009 is a testament to the fact that the science of
conduct is swayed in large by human greed, ambition, and
hunger for power, money, fame and glory. Scandals have
proved that there is an urgent need for good conduct based on
strong corporate governance, ethics and accounting & auditing
standards. Unlike Enron, which sank due to agency problem,
Satyam was brought to its knee due to tunneling effect. The
Satyam scandal highlights the importance of securities laws
and CG in emerging markets. Indeed, Satyam fraud spurred
the government of India to tighten the CG norms to prevent
recurrence of similar frauds in future. Thus, major financial
reporting frauds need to be studied for lessons-learned and
strategies-to-follow to reduce the incidents of such frauds in
the future. The increasing rate of white-collar crimes demands
stiff penalties, exemplary punishments, and effective
enforcement of law with the right spirit.

INTRODUCTION
Satyam computers were founded in 1987 by Ramalinga Raju and were
recognized as a public limited company in 1991.
This scam was the biggest corporate scam in India and probably one of the
biggest in the world and it could be categorized in three heads:
Phase 1: Since 1999 for the next three years Indian software company
earned good profits as they had big orders.
Phase 2: began in 2001 were the actual altercation of the accounts took
place so as to keep the profits at the higher end and to have a high share
price. Since the prices were high the satyam promoters sold off their share
and the money so accumulated was used to buy huge portions of land. This
is when Raju set up many infrastructure and investment companies .This
phase went off till 2004
Phase 3: Began in 2007 during which company showed huge cash balances
and fixed deposits which were all fake as the company was actually deprived
of funds to keep the company floating and this phase continued till Rajus
confession on 7 Jan 2009
The Satyam fraud is a perfect example of how lax attitude from some people
can enable a person to reduce a booming empire to a shadow of its former
glory. The major issues that the management faced in the Satyam scandal
was that there was not a lot of clarity regarding the actions of the Company
and its management and still people did not even once raise the question.
And it was here that the shareholders and the various stakeholders of
Satyam lost out to their own greed and complacency.
Another management issue was the lack of corporate governance in Satyam.
Had a proper structure been formulated where Raju should have been
accountable for each and every year rather than the scam which hit out in
one single go. The balance sheets had been tempered with for years and it
was only when Raju himself came forward with the information was the
scam detected, this showed another lack of professionalism from the
auditors of the firm. Another issue that can be pointed out is greed on part
of both Raju and the stakeholders.
Lastly the most important management issue was the blind trust that the
stakeholders of the organization did on Ramalinga Raju this along with Rajus
extremely low behaviorism depictions allowed such a large scam to take
place.

The first issue that attains importance is how the people at Satyam did not
come forward since the time the Company was with Raju to take a look at
how the organization was being run. The people at Satyam also displayed
blind trust in Raju and his ways. They laid back and allowed Raju to go
forward with his plans and conspiracies. According to Sartre (1956) this is
how the existentialism nature of humans comes to fore. They molded
themselves to trust each and every word that Raju said regarding the
workings of the Company and how the organization was progressing. They
did not challenge his decisions and his actions.
Another management issue that was faced in the Satyam scandal was the
lack of a proper structure in the organization. This proved how humans can
go against the thinking of Plato who said that humans act rationally at most
times and reason each and every decision that they take before going ahead
with anything. According to Plato humans are primarily a thinker capable of
reasoning. However in this case all the traditionalist scholars were proven
wrong as some of the best minds in the industry did not reason that they
should have a proper corporate governance structure in place that does not
allow a single man so much power that he is able to wreck havoc in the
organization. They went ahead with their plans of growth as per Raju and
did not utilize their rational nature and made wrong decisions.
The next point that was a major issue in this scam was the presence of plain
and simple greed. Greed on part of Raju to increase the firm and the same
greed on part of the stakeholders to be part of such a growing firm. This
shows that the thinking of the modern philosophers including Freud and
Hobbes that human beings are at the end of the day fueled by self interested
desires. Their view is something that fits precisely on this scenario. It was
the greed of one man supported by the greed of others that allowed such a
huge scandal to take place.
The last point that has to be understood is the lack of
the auditors at Satyam showed. This depicts another
nature according to Desmond Mores (1977), this
selflessness among the auditors to allow the comfort
hassles to take over their sense of duty and this too
continue his years long fraud with the organization.

Magnitude of Frauds

professionalism that
form of the human
shows the lack of
of an audit without
allowed Raju to get

Organizations of all types and sizes are subject to fraud. On a number of

occasions over the past few decades, major public companies have
experienced financial reporting fraud, resulting in turmoil in the U.S. capital
markets, a loss of shareholder value, and, in some cases, the bankruptcy of
the company itself. Although it is generally accepted that the SarbanesOxley Act has improved corporate governance and decreased the incidence
of fraud, recent studies and surveys indicate that investors and management
continue to have concerns about financial statement fraud. For example:

The Association of Certified Fraud Examiners (ACFE) 2010 Report to

the Nations on Occupational Fraud and Abuse found that financial
statement fraud, while representing less than five percent of the cases
of fraud in its report, was by far the most costly, with a median loss of
$1.7 million per incident. Survey participants estimated that the typical
organization loses 5% of its revenues to fraud each year. Applied to
the 2011 Gross World Product, this figure translates to a potential
projected annual fraud loss of more than $3.5 trillion. The median loss
caused by the occupational fraud cases in our study was $140,000.
More than one-fifth of these cases caused losses of at least $1 million.
The frauds reported to us lasted a median of 18 months before being
detected.

Fraudulent Financial Reporting: 19982007, from the Committee of

Sponsoring Organizations of the Tread way Commission (the 2010
COSO Fraud Report), analyzed 347 frauds investigated by the U.S.
Securities and Exchange Commission (SEC) from 1998 to 2007 and
found that the median dollar amount of each instance of fraud had
increased three times from the level in a similar 1999 study, from a
median of $4.1 million in the 1999 study to $12 million. In addition,
the median size of the company involved in fraudulent financial
reporting increased approximately six-fold, from $16 million to $93
million in total assets and from $13 million to $72 million in revenues.

A 2009 KPMG Survey of 204 executives of U.S. companies with

annual revenues of $250 million or more found that 65 percent of the
respondents considered fraud to be a significant risk to their
organizations in the next year, and more than one-third of those
identified financial reporting fraud as one of the highest risks.

Fifty-six percent of the approximately 2,100 business professionals

surveyed during a Deloitte Forensic Center webcast about reducing
fraud risk predicted that more financial statement fraud would be
uncovered in 2010 and 2011 as compared to the previous three years.

Almost half of those surveyed (46 percent) pointed to the recession as

the reason for this increase.

According to Annual Fraud Indicator 2012 conducted by the National

Fraud Authority (U.K.), The scale of fraud losses in 2012, against all
victims in the UK, is in the region of 73 billion per annum. In 2006,
2010 and 2011, it was 13, 30 and 38 billions, respectively. The 2012
estimate is significantly greater than the previous figures because it
includes new and improved estimates in a number of areas, in
particular against the private sector. Fraud harms all areas of the UK
economy.

Recommendations

Lax attitude:
Employee awareness is of utmost importance when we have to deal with lax
attitude. Employees must be aware about the pros and cons of this attitude.
Lax attitude can be bearable to some extent but when it come to reputation
of organization then management should keep a strong check on the
attitude of employees and should hold various review meetings so as to look
in to the matter more effectively

Lack of corporate governance structure:

A strong corporate governance structure could help in keeping control and
ownership. If the structure is strong there are less chances of company
being hit by the scams because it would be governed by management,
shareholders and stakeholders and also there would be fewer conflicts of
interests.

Blind Trust in leadership.

Trust is always essential but blind trust is always fatal. Had the organization
not trusted Raju blindly there could be a chance that such scam would not
have taken place. To avoid this one must conduct Leadership audit surveys
so as to keep a check on your leaders.
This is one point among two, the other being greed, that an organization
cannot do a lot about. But yes they should be aware of the workings of the
auditors and should perform dummy transactions to test the auditors every
once in a while.
Thus it can be said that there a lot of ways by which human nature can
affect the functioning of a fully capable organization.

BIBLIOGRAPHY

http://myassignmenthelp.info/assignments/accountsassignment-essay-on-essay-satyam-computers/
https://www.scribd.com/doc/68856209/Satyam-Fraud-ASummary
http://articles.economictimes.indiatimes.com/keyword/satya
m-scandal
http://knowledge.wharton.upenn.edu/article/scandal-atsatyam-truth-lies-and-corporate-governance/