The Satyam Fraud Case Study

The Satyam Fraud Case Study

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The Satyam Fraud Case Study

Satyam computer service was a lading outsourcing firm in India with a reported revenue of five hundred and fifty five million dollars and with a stated employee’s number of fifty three thousand. However, the company’s founder and chairperson, Ramalinga Raju, confessed to shocking fraud in the company’s balance sheet. According to his confession, the balance sheet did carry inflated cash of over one billion US dollars; seventy seven million dollars of non-existing accrued interest, two hundred and fifty million understated liability, and overstated receivables of over one hundred and one million dollars in US currency.

Raju schemed the fraud back in 2002 at a time when American Depository Receipts (ADRs) were popular among foreign investors by maintaining two subaccounts within the company’s main bank account(Madan, 2013). Then, Raju cronies would operate the main bank account who gave two bank statements for the same account to the finance and account reconciliation (FAR) team. One of the statement was genuine while the other contained the fictitious information. However, the FAR team had to adopt the skewed document. Moreover, an inside team loyal to Raju developed a software to generate altered invoices with always overstated figure (Madan, 2013). Furthermore, the unrecorded loan was money lent to Satyam by private companies owned by Raju. Thirteen thousand employees were the overstated the number of employees and their salary diverted to Raju private accounts for personal wealth as per the investigating officer report. Al this fraud happened with the connivance of internal and statutory auditors such as Price Waterhouse India and Ola Ullsten. In the process, investors oblivious of the fraud invested in the company losing billions of dollars just a week after the case was uncovered.

Following the Raju’s confession to the fraud, Indian authorities put to account ten people including Raju but all are out on bail. PWI in the face of dented image suspended its chief relationship partner to Satyam due to his role in the fraud. Moreover, PCAOB and SEC penalized the five auditing firm a total of over seven million dollars for their failure to uncover the fraud (Madan, 2013). Lastly, permanently removing Pulavarathi Siva Prasd and Chintapatla Ravindernath from Institute of Accountants of India was the last final follow up effort on the fraud.