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SATYAM ‘SCAM’
Submitted to Submitted by
Project Incharge
BFIA 1st Semester
Shaheed Sukhdev College
of
Business Studies
Roll No………………
Date : 16-Aug-2010
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The Satyam Scam
Accounting Scandal
The Satyam Computer Services scandal was publicly announced on 7 January 2009,
when Chairman Ramalinga Raju confessed that Satyam's accounts had been falsified.
Details
On 7 January 2009, company Chairman Ramalinga Raju resigned after notifying board
members and the Securities and Exchange Board of India (SEBI) that Satyam's accounts
had been falsified.
Raju confessed that Satyam's balance sheet of 30 September 2008 contained:
Inflated figures for cash and bank balances of S 5,040 crore (as against S 5,361
crore reflected in the books).
An accrued interest of S 376 crore which was non-existent.
An understated liability of S 1,230 crore on account of funds was arranged by
himself.
An overstated debtors' position of S 490 crore (as against S 2,651 crore in the
books).
For second quarter Satyam reported a revenue of S 2700 Crores and an operating
margin of S 649 crores (24% of revenues) as against actual operating margin of
S 61 crore (3% of revenue)
Actual operating margin was S 61 crore but reported S 649 crore.
Raju claimed in the same letter that neither he nor the managing director had benefited
financially from the inflated revenues. He claimed that none of the board members had
any knowledge of the situation in which the company was placed.
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As selling of shares by promoters had to be disclosed to SEBI he pledged his
shares which is not required to be disclosed anywhere.
Debtors were overstated by S 490 crores generating false sales receipt through
specially programmed software which also generated the acceptance report by the
so called customers.
Paid huge sums to the independent directors and not even one director attended all
the board meetings (source from media)
He understated liability amounting to S 1230 on account of funds arranged by
himself.
Actually this was last attempt of Raju to bridge the gap between the actual assets and
fictitious assets through the Mayta’s assets.
Aftermath
Raju Brothers arrested and chief financial officer Srinivas Vadlamani was
arrested.
The Income TAX dept is independently probing the accounting fraud in Satyam
with a focus of tax deducted at source and BENAMI Deals.
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Investigation of CID revealed that there only 40000 employees were actually
working as against 53000 shown in books.
Cases on Price Waterhouse Coppers were held but they were later released on
account of their faith on the information produced by Satyam.
The Ministry of Corporate Affairs said that the government has referred the
financial incompetent by Satyam Computer Services to the Serious Frauds
Investigation Office (SFIO).
Satyam’s Board of Directors was dissolved and a new board including prominent
personalities like Deepak Parekh, KIRAN KARNIK, C ACHUTAN, TARUN
DASS, TN MANOHARAN and SB MAINAK are among other 3 board members
appointed by the Government.
Merrill lynch and world bank terminated their contracts with Satyam.
Own Comments
Fraud was committed to avoid change in management and takeovers by majority
shareholders as the promoters held a small percentage of share in the company. There
excessive competition and to survive in market Directors had to show an improved
performance on regular basis. There was negligence on part of auditors as they totally
relied on the information provided by Satyam. This was well crafted scam but acquiring
of Maytas didn’t work as Raju didn’t took Shareholder in confidence.
Bibliography
www.wikipedia.org
www.google.co.in
www.scribd.com
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www.satyamscam.in
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