Corporate Accounting Fraud

Satyam Computers Limited

Presented to: Madam Nadia I. Hassan

Presented By: M. Umar Iftikhar
Student ID: 16P00038

Lahore School of Economics

11th Nov 16
Balance Sheet
The balance sheet, also called the statement of financial position, is the
third general purpose financial statementprepared during the
accounting cycle. It reports a company's assets, liabilities, and equity at
a single moment in time. You can think of it like a snapshot of what the
business looked like on that day in time.
The balance sheet is basically a report version of theaccounting
equationalso called thebalance sheet equationwhere assets always
equals equation liabilities plus shareholder's equity.

Income Statement
The income statement is also known as thestatement of operations,
theprofit and loss statement, orP&L. It presents a company's revenues,
expenses, gains, losses and net income for a specified period of time
such as a year, quarter, month, 13 weeks, etc.
Presentation Flow

What is Fraud?
Satyam -- Background
Financial performance Actual vs Fraudulent
Overall Impact
Lessons
What is Fraud?

A deception or misrepresentation that an individual or entity makes

knowing that misrepresentation could result in some unauthorized
benefit to the individual or to the entity or some other party by
Association of Certified Fraud Examiners

Fraud cheats the target organization of its legitimate income and

results in a loss of goods, money, and even goodwill and reputation.

Fraud often employs illegal and immoral, or unfair means

DOLLAR IMPACT OF FRAUDS

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
SATYAM- A QUICK COMPANY
OVERVIEW
Satyam Computer Services Limited was a rising-star in the Indian
outsourced IT-services industry. The company was formed in 1987 in
Hyderabad (India) by Mr. Ramalinga Raju
By 2003, Satyams IT services businesses included 13,120 technical
associates servicing over 300 customers worldwide
From 2003-2008, Satyam generated USD $467 million in total sales.
By March 2008, the company had grown to USD $2.1 billion.
The company demonstrated an annual compound growth rate of 35%
over that period.
SATYAM- SCANDAL

On January 7, 2009, Mr. Raju disclosed in a letter to Satyam Computers

Limited Board of Directors that he had been manipulating the
companys accounting numbers for years.
Overstated assets on Satyams balance sheet by $1.47 billion.
Nearly $1.04 billion in bank loans and cash that the company claimed to
own was non-existent.
Results announced on October 17, 2009 overstated quarterly revenues
by 75 percent and profits by 97 percent
6000 fake salary accounts
GLANCE ON BALANCE SHEET AND
INCOME STATEMENT
 Aftermath of Satyam Scandal
Merrill Lynch(wealth management division of bank of America) terminated its
engagement with Satyam
Credit Suisse(Swiss financial services holding company) suspended its coverage of
Satyam
PricewaterhouseCoopers PwC (one of the worlds largest auditor firms) came
under intense scrutiny and its license to operate was revoked.
Satyams shares fell to 11.50 rupees on January 10, 2009, their lowest level since
March 1998, compared to a high of 544 rupees in 2008
Investors lost $2.82 billion in Satyam
Lessons

Investigate All Inaccuracies

Ruined Reputations: Fraud does not just look bad on a company; it looks bad on
the whole industry and a country.
Corporate Governance Needs to Be Stronger

Open Journal of Accounting, 2013, 2, 26-38

Source:http://dx.doi.org/10.4236/ojacct.2013.22006 Published Online April 2013
(http://www.scirp.org/journal/ojacct)