Accounting Fraud with Reference of Satyam Company

Abstract

Accounting Fraud means misrepresentation or alteration of accounting record regarding sales, revenue, expenses and other factors for a profit motive such as inflating company stock values, obtaining more favorable financing or avoiding debt obligations. In this research paper we analyzed the accounting fraud with case study of Satyam Company is classic example, Satyam means “truth” in the ancient Indian language “Sanskrit”. Satyam won the “Golden Peacock Award” for the best governed company in 2007 and in 2009. From being India’s IT “crown jewel” and the country’s “fourth largest” company with high-profile customers. Mr. Ramalinga Raju (Chairman and Founder of Satyam), who has been arrested and has confessed to a $1.47 billion (or Rs. 7800 crore) fraud, admitted that he had made up profits for years. The Auditors Role and Factors Contributing to Fraud Global auditing firm, Price water house Coopers (PwC), who had audited Satyam’s books from June 2000 until the discovery of the fraud in 2009. Several commentators criticized PwC harshly for failing to detect the fraud. Indeed, PwC signed Satyam’s financial statements and was responsible for the numbers under the Indian law. Satyam’s 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. Thus, investors lost $2.82 billion in Satyam. Unfortunately, Satyam significantly inflated its earnings and assets for years and rolling down Indian stock markets and throwing the industry into turmoil. Criminal charges were brought against Mr. Raju, including: criminal conspiracy, breach of trust, and forgery.