Assignment 1: Fraud Presentation

[Audio] Assignment 1: Fraud Presentation Assignment 1: Fraud Presentation.

[Audio] BUS130: Accounting Company that was listed on a stock exchange where accounting fraud took place. BUS130: Accounting Company that was listed on a stock exchange where accounting fraud took place..

[Audio] . 2009. [image] Aerial view of a neon highway intersection.

[Audio] INTRODUCTION The Satyam Computers scam, one of India's worst accounting frauds, unfolded in 2009. Once a leading player in the IT sector, Satyam Computers was brought to ruin by its founders' financial mismanagement. This debacle sparked discussions about the critical role of CEOs in company growth and their relationships with boards of directors. The scandal exposed the importance of corporate governance, particularly in establishing effective audit committees and defining board member responsibilities. The Satyam scam shook investors and cast a spotlight on the consequences of poor governance practices. INTRODUCTION The Satyam Computers scam, one of India's worst accounting frauds, unfolded in 2009. Once a leading player in the IT sector, Satyam Computers was brought to ruin by its founders' financial mismanagement. This debacle sparked discussions about the critical role of CEOs in company growth and their relationships with boards of directors. The scandal exposed the importance of corporate governance, particularly in establishing effective audit committees and defining board member responsibilities. The Satyam scam shook investors and cast a spotlight on the consequences of poor governance practices..

[Audio] Background story of the Satyam fraud case ​ In the Indian outsourced IT-services market, Satyam Computer Services Limited was a rising star. Mr. Ramalinga Raju established the firm in Hyderabad in 1987. The company began with 20 workers and quickly expanded to become a worldwide company with operations in 65 countries across the world. Satyam was the first Indian business to be listed on three global stock exchanges, namely New York Stock Exchange (NYSE), DOW Jones, and EURONEXT. Background story of the Satyam fraud case ​ In the Indian outsourced IT-services market, Satyam Computer Services Limited was a rising star. Mr. Ramalinga Raju established the firm in Hyderabad in 1987. The company began with 20 workers and quickly expanded to become a worldwide company with operations in 65 countries across the world. Satyam was the first Indian business to be listed on three global stock exchanges, namely New York Stock Exchange (NYSE), DOW Jones, and EURONEXT..

[Audio] What happened?​ The Satyam scandal was a deliberate scam organized by Raju and a few others. They fabricated figures to make the company appear more successful, such as increasing sales, profits, and cash. This was achieved by creating fake invoices and bank statements, as well as inflating customer numbers. The auditors responsible for ensuring the shareholders' interests missed these discrepancies, highlighting the weaknesses in corporate governance. The Satyam scandal had severe consequences. Stock prices plummeted, wiping out investor capital. Workers' livelihoods were threatened as the company struggled to stay afloat. The scandal shattered trust in the Indian business community, raising concerns about transparency and accountability. The Indian government intervened to prevent Satyam's collapse, protecting stakeholders' interests. Tech Mahindra eventually acquired the company, beginning a long process of restoration. The incident served as a lesson for Indian regulators, leading to significant reforms in corporate governance, accounting practices, and auditing regulations. The Satyam scandal underscores the crucial role of robust regulatory oversight, ethical conduct, and sound corporate governance in maintaining trust and integrity within businesses. What happened?​ The Satyam scandal was a deliberate scam organized by Raju and a few others. They fabricated figures to make the company appear more successful, such as increasing sales, profits, and cash. This was achieved by creating fake invoices and bank statements, as well as inflating customer numbers. The auditors responsible for ensuring the shareholders' interests missed these discrepancies, highlighting the weaknesses in corporate governance. The Satyam scandal had severe consequences. Stock prices plummeted, wiping out investor capital. Workers' livelihoods were threatened as the company struggled to stay afloat. The scandal shattered trust in the Indian business community, raising concerns about transparency and accountability. The Indian government intervened to prevent Satyam's collapse, protecting stakeholders' interests. Tech Mahindra eventually acquired the company, beginning a long process of restoration. The incident served as a lesson for Indian regulators, leading to significant reforms in corporate governance, accounting practices, and auditing regulations. The Satyam scandal underscores the crucial role of robust regulatory oversight, ethical conduct, and sound corporate governance in maintaining trust and integrity within businesses..

[Audio] Who was responsible?​ B. Ramalinga Raju, his brother and Satyam's former managing director; former PwC auditors Subramani Gopalakrishnan and T Srinivas; former chief financial officer Vadlamani Srinivas and Raju's other brother are mostly to blame for the Satyam fraud case. Who was responsible?​ B. Ramalinga Raju, his brother and Satyam's former managing director; former PwC auditors Subramani Gopalakrishnan and T Srinivas; former chief financial officer Vadlamani Srinivas and Raju's other brother are mostly to blame for the Satyam fraud case..

[Audio] Method of fraud In 2003, Raju began manipulating Satyam's financial records in order to present a more optimistic picture of the company's expansion and success than it had actually achieved. Along with his brother Rama Raju, the managing director of Satyam, and several other high-ranking executives, Raju engaged in a complex web of deceit by creating fraudulent invoices, bank accounts, clients, and even staff members. To exacerbate matters, Raju invested in his family's businesses, including Maytas, using Satyam's money for his own gain in real estate and other ventures For six years, Raju fooled regulators, auditors, investor and analysts luring them in with his fabricated data and prizes. One of the most valuable IT companies in India, Satyam saw a sharp increase in its stock price in 2008, rising from Rs. 10 to Rs. 544. In addition, the company has won accolades for corporate governance and social responsibility, including the Golden Peacock Award in 2008. In 2003, Raju began manipulating Satyam's financial records in order to present a more optimistic picture of the company's expansion and success than it had actually achieved. Along with his brother Rama Raju, the managing director of Satyam, and several other high-ranking executives, Raju engaged in a complex web of deceit by creating fraudulent invoices, bank accounts, clients, and even staff members. To exacerbate matters, Raju invested in his family's businesses, including Maytas, using Satyam's money for his own gain in real estate and other ventures For six years, Raju fooled regulators, auditors, investor and analysts luring them in with his fabricated data and prizes. One of the most valuable IT companies in India, Satyam saw a sharp increase in its stock price in 2008, rising from Rs. 10 to Rs. 544. In addition, the company has won accolades for corporate governance and social responsibility, including the Golden Peacock Award in 2008. Method of fraud.

[Audio] For six years, Raju fooled regulators, auditors, investor and analysts luring them in with his fabricated data and prizes. One of the most valuable IT companies in India, Satyam saw a sharp increase in its stock price in 2008, rising from Rs. 10 to Rs. 544. In addition, the company has won accolades for corporate governance and social responsibility, including the Golden Peacock Award in 2008. Still, the façade began to crumble toward the end of 2008, right around the time of the world financial crisis that decimated the IT industry. Lenders and creditors put more pressure on Raju to pay his debts as Satyam's sales and profitability declined. In addition, the World Bank looked into Satyam's actions and prohibited him from working on any of its projects for eight years since Raju received illegal employee benefits. For six years, Raju fooled regulators, auditors, investor and analysts luring them in with his fabricated data and prizes. One of the most valuable IT companies in India, Satyam saw a sharp increase in its stock price in 2008, rising from Rs. 10 to Rs. 544. In addition, the company has won accolades for corporate governance and social responsibility, including the Golden Peacock Award in 2008. Still, the façade began to crumble toward the end of 2008, right around the time of the world financial crisis that decimated the IT industry. Lenders and creditors put more pressure on Raju to pay his debts as Satyam's sales and profitability declined. In addition, the World Bank looked into Satyam's actions and prohibited him from working on any of its projects for eight years since Raju received illegal employee benefits..

[Audio] Desperate to salvage his collapsing business, Raju launched an unfortunate $1.6 billion bid for Maytas in December 2008 using Satyam's financial reserves. But this tactic backfired horribly, inciting a ferocious outcry from Satyam board members and shareholders who perceived the deal as a financial diversion and a clear conflict of interest. Raju had twelve hours to back out of the agreement, but by then Satyam's stock had fallen fifty-five percent. In response to Raju's admission, the Central Bureau of Investigation (CBI), the Securities and Exchange Board of India (SEBI), and the Serious Fraud Inquiry Office (SFIO) began a comprehensive investigation. After being apprehended, Raju and his friends were accused with a number of crimes, including insider trading, money laundering, breach of trust, forgery, criminal conspiracy, and account falsification. Desperate to salvage his collapsing business, Raju launched an unfortunate $1.6 billion bid for Maytas in December 2008 using Satyam's financial reserves. But this tactic backfired horribly, inciting a ferocious outcry from Satyam board members and shareholders who perceived the deal as a financial diversion and a clear conflict of interest. Raju had twelve hours to back out of the agreement, but by then Satyam's stock had fallen fifty-five percent. In response to Raju's admission, the Central Bureau of Investigation (CBI), the Securities and Exchange Board of India (SEBI), and the Serious Fraud Inquiry Office (SFIO) began a comprehensive investigation. After being apprehended, Raju and his friends were accused with a number of crimes, including insider trading, money laundering, breach of trust, forgery, criminal conspiracy, and account falsification..

[Audio] Following the Satyam Computers scandal, suppliers, investors, employees, and clients of Satyam were left feeling uneasy and afraid. The company was plagued by layoffs, cancelled projects, and unpaid debt, all of which had a detrimental effect. Following the Satyam Computers scandal, suppliers, investors, employees, and clients of Satyam were left feeling uneasy and afraid. The company was plagued by layoffs, cancelled projects, and unpaid debt, all of which had a detrimental effect..

[Audio] Detection of Fraud Whistleblower Complaint: Ramalinga Raju, the founder and former chairman of Satyam, wrote a letter of confession to the board of directors of the company, which served as the first step towards the discovery of the fraud. Raju acknowledged in the letter that he had manipulated the company's financial statements over a number of years to artificially boost earnings. Auditor Scrutiny: After Raju's admission, the external auditors' investigation became more intense. The auditing firm representing Satyam, Price Waterhouse (PW), was the subject of an inquiry due to its failure to identify any fraudulent activity while doing audits. This sparked concerns about Indian auditing standards and procedures. Detection of Fraud Whistleblower Complaint: Ramalinga Raju, the founder and former chairman of Satyam, wrote a letter of confession to the board of directors of the company, which served as the first step towards the discovery of the fraud. Raju acknowledged in the letter that he had manipulated the company's financial statements over a number of years to artificially boost earnings. Auditor Scrutiny: After Raju's admission, the external auditors' investigation became more intense. The auditing firm representing Satyam, Price Waterhouse (PW), was the subject of an inquiry due to its failure to identify any fraudulent activity while doing audits. This sparked concerns about Indian auditing standards and procedures..

[Audio] Government Intervention: Investigating the fraud, the Indian government acted quickly. Investigations into Satyam's financial dealings by the Serious Fraud Investigation Office (SFIO) and other regulatory agencies turned up evidence of financial manipulation and accounting irregularities. Forensic Accounting: The identification of the fraud's scope was made possible in large part by forensic accountants. To rebuild the company's actual financial condition and spot inconsistencies, they painstakingly reviewed financial records, transactions, and other supporting documentation. Government Intervention: Investigating the fraud, the Indian government acted quickly. Investigations into Satyam's financial dealings by the Serious Fraud Investigation Office (SFIO) and other regulatory agencies turned up evidence of financial manipulation and accounting irregularities. Forensic Accounting: The identification of the fraud's scope was made possible in large part by forensic accountants. To rebuild the company's actual financial condition and spot inconsistencies, they painstakingly reviewed financial records, transactions, and other supporting documentation..

[Audio] Market Reaction: Satyam's stock price plummeted following the revelation of the fraud, triggering further investigation and scrutiny from investors, analysts, and regulatory authorities. The drastic decline in market value raised red flags and accelerated efforts to uncover the truth. Corporate Governance Reforms: The Satyam scandal prompted a reevaluation of corporate governance practices in India. Reforms were implemented to strengthen oversight mechanisms, enhance transparency, and hold corporate leaders and auditors accountable for their actions. In summary, a combination of whistleblower disclosure, regulatory intervention, forensic investigation, market scrutiny, and subsequent reforms were instrumental in detecting the fraud in the Satyam scam. Market Reaction: Satyam's stock price plummeted following the revelation of the fraud, triggering further investigation and scrutiny from investors, analysts, and regulatory authorities. The drastic decline in market value raised red flags and accelerated efforts to uncover the truth. Corporate Governance Reforms: The Satyam scandal prompted a reevaluation of corporate governance practices in India. Reforms were implemented to strengthen oversight mechanisms, enhance transparency, and hold corporate leaders and auditors accountable for their actions. In summary, a combination of whistleblower disclosure, regulatory intervention, forensic investigation, market scrutiny, and subsequent reforms were instrumental in detecting the fraud in the Satyam scam..

[Audio] Penalties Legal Proceedings Against offenders: The founder and former chairman of Satyam, Ramalinga Raju, was detained and charged with a crime for his role in the scam, along with a number of other important executives. Under Indian penal laws, Raju and others were accused of crimes like forgery, cheating, and criminal conspiracy. Financial Penalties and Fines: The fraud resulted in fines and penalties for Satyam as well. The business was had to pay significant fines to Indian regulatory bodies. Price Waterhouse (PW), Satyam's auditor, was also fined for failing to uncover the fraud during audits. Penalties Legal Proceedings Against offenders: The founder and former chairman of Satyam, Ramalinga Raju, was detained and charged with a crime for his role in the scam, along with a number of other important executives. Under Indian penal laws, Raju and others were accused of crimes like forgery, cheating, and criminal conspiracy. Financial Penalties and Fines: The fraud resulted in fines and penalties for Satyam as well. The business was had to pay significant fines to Indian regulatory bodies. Price Waterhouse (PW), Satyam's auditor, was also fined for failing to uncover the fraud during audits..

[Audio] Settlements and Compensation: Investors and shareholders who lost money as a result of the fraud sued for damages. In order to resolve some of these cases, Satyam promised to compensate the harmed parties, however the sums varied. Negative Effects on Reputation and Business: The Satyam scandal significantly damaged the company's reputation and had a considerable impact on its business operations. Satyam lost the faith of its clients, which resulted in the termination of commercial possibilities and contracts. The market value of the company fell, causing investors and shareholders to suffer significant financial losses. Settlements and Compensation: Investors and shareholders who lost money as a result of the fraud sued for damages. In order to resolve some of these cases, Satyam promised to compensate the harmed parties, however the sums varied. Negative Effects on Reputation and Business: The Satyam scandal significantly damaged the company's reputation and had a considerable impact on its business operations. Satyam lost the faith of its clients, which resulted in the termination of commercial possibilities and contracts. The market value of the company fell, causing investors and shareholders to suffer significant financial losses..

[Audio] Consequences for Regulation: The controversy led India's regulatory bodies to bolster their monitoring and enforcement systems. Reforms were put in place to raise the bar for corporate governance, increase transparency, and ensure that auditors and executives of companies were held responsible for their activities. Overall, the penalties in the Satyam scam encompassed legal actions against perpetrators, fines and financial penalties, compensation and settlements for affected parties, reputation damage, regulatory repercussions, and the eventual acquisition of the company by Tech Mahindra. Consequences for Regulation: The controversy led India's regulatory bodies to bolster their monitoring and enforcement systems. Reforms were put in place to raise the bar for corporate governance, increase transparency, and ensure that auditors and executives of companies were held responsible for their activities. Overall, the penalties in the Satyam scam encompassed legal actions against perpetrators, fines and financial penalties, compensation and settlements for affected parties, reputation damage, regulatory repercussions, and the eventual acquisition of the company by Tech Mahindra..

[Audio] Opinion on External Auditor Trust The Satyam scam dealt a severe blow to trust in external auditors, particularly Price Waterhouse (PW), which was Satyam's auditor at the time of the fraud. The scandal raised significant concerns about the effectiveness of auditing practices and the reliability of audit reports in India. Failure to Detect Fraud: One of the primary reasons for the erosion of trust in external auditors was their failure to detect the fraud despite conducting audits of Satyam's financial statements for several years. The magnitude of the financial manipulation at Satyam, which involved overstating revenues, profits, and assets, raised questions about the rigor and thoroughness of the audit procedures employed by PW. Independence and Objectivity: The Satyam scandal underscored the importance of auditor independence and objectivity. There were allegations that PW may have been compromised due to its close relationship with Satyam's management, which could have influenced its ability to conduct independent audits and uncover irregularities. Opinion on External Auditor Trust The Satyam scam dealt a severe blow to trust in external auditors, particularly Price Waterhouse (PW), which was Satyam's auditor at the time of the fraud. The scandal raised significant concerns about the effectiveness of auditing practices and the reliability of audit reports in India. Failure to Detect Fraud: One of the primary reasons for the erosion of trust in external auditors was their failure to detect the fraud despite conducting audits of Satyam's financial statements for several years. The magnitude of the financial manipulation at Satyam, which involved overstating revenues, profits, and assets, raised questions about the rigor and thoroughness of the audit procedures employed by PW. Independence and Objectivity: The Satyam scandal underscored the importance of auditor independence and objectivity. There were allegations that PW may have been compromised due to its close relationship with Satyam's management, which could have influenced its ability to conduct independent audits and uncover irregularities..

[Audio] Regulatory Scrutiny: The role of external auditors came under intense regulatory scrutiny in the aftermath of the Satyam scam. Regulators questioned whether auditors were adequately fulfilling their responsibilities to provide reliable and accurate financial information to stakeholders. Repercussions for Auditing Profession: The failure of external auditors to detect the fraud at Satyam had broader implications for the auditing profession in India and globally. It highlighted the need for enhanced oversight, stricter regulations, and improvements in auditing standards to prevent similar incidents in the future and restore trust in the profession. Reforms and Remedial Measures: The Satyam scandal prompted reforms aimed at strengthening auditing practices and restoring confidence in external auditors. Regulatory authorities implemented measures to enhance auditor independence, improve audit quality, and increase transparency in the audit process. Regulatory Scrutiny: The role of external auditors came under intense regulatory scrutiny in the aftermath of the Satyam scam. Regulators questioned whether auditors were adequately fulfilling their responsibilities to provide reliable and accurate financial information to stakeholders. Repercussions for Auditing Profession: The failure of external auditors to detect the fraud at Satyam had broader implications for the auditing profession in India and globally. It highlighted the need for enhanced oversight, stricter regulations, and improvements in auditing standards to prevent similar incidents in the future and restore trust in the profession. Reforms and Remedial Measures: The Satyam scandal prompted reforms aimed at strengthening auditing practices and restoring confidence in external auditors. Regulatory authorities implemented measures to enhance auditor independence, improve audit quality, and increase transparency in the audit process..

[Audio] References Financial Times The Wall Street Journal Bloomberg Reuters Securities and Exchange Board of India (SEBI): Serious Fraud Investigation Office (SFIO) Government of India Official Statements This Photo by Unknown Author is licensed under CC BY This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY This Photo by Unknown Author is licensed under CC BY-SA-NC This Photo by Unknown Author is licensed under CC BY This Photo by Unknown Author is licensed under CC BY References Financial Times The Wall Street Journal Bloomberg Reuters Securities and Exchange Board of India (SEBI): Serious Fraud Investigation Office (SFIO).

[Audio] THANK YOU To- Ms. Momal Khan By- Ansh Yadav THANK YOU To- Ms. Momal Khan By- Ansh Yadav.