ACCOUNTING FRAUD IN CORPORATE: CASE STUDY ON SATYAM COMPUTERS LIMITED

Abstract

In the modern globalized and liberalized era, the firms are facing stiff competition and are under pressure to show the good financial results through financial reporting. In such an environment, they start using the creative accounting practices, especially in unsuitable situation to boost up the profit or manipulate the assets and liabilities to report to the stakeholders the image that is better than the actual image. Corporate accounting fraud is a major problem that is increasing both in its frequency and severity. Research evidence has shown that growing number of frauds have undermined the integrity of financial reports, contributed to substantial economic losses, and eroded investor’s confidence regarding the usefulness and reliability of financial statements. An attempt is made in this paper to examine in-depth and analyse India's Enron, Satyam Computer's " creative-accounting " scandal. Satyam was brought to its knee due to 'tunnelling' effect. The Satyam scandal highlights the importance of securities laws and Corporate Governance in emerging markets. Their scandal/fraud has put a big question mark on the entire corporate governance system in India. 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-tofollow” to reduce the incidents of such frauds in the future. Thus this paper is devoted to the case study of Satyam, its creative accounting scandal and the effect of it on the global market.