Topic : Satyam Scandal

Presented By :
Vivek Bhoir Piyush Borade
Vijay Gusain Suchit Mandlik Sandesh Surve

(MS111204)
(MS111206) (MS111212) (MS111223) (MS111242)

Satyam computers services ltd

Founded by

: B. Ramalinga Raju CEO : Mr. A. S. Murthy Year : 1987 Industry : Information Technology Registered office : hydrabad India Type of company : Multinational Employees : 54000

 Satyam Computer Services provides consulting, systems

design, software development, system integration, and application maintenance services, extended engineering solutions, and infrastructure management services.
Its eBusiness focuses on; designing, developing, integrating,

and maintaining Internet-based applications.

It also offers human resources, finance and accounting,

customer contact, and transaction processing.

 Development centers

across the world

Stance over 66 countries

North America

contributes around 65% sales revenue followed by Europe

Satyam Scam
Satyam board announces the decision to buy stake in Maytas

infrastructure a company owned by the promoter family o f Satyam for INR 65 Billion Dec 16 2008

The companys balance sheet was inflated to rs 5,361 crore at

the end of september 2008 against the actual rs 5,040 crore

There is an artificial cash balance of Rs 588 crore in sept 2008.

 Raju also admitted that Satyam's profits were inflated over

several years. And it is difficult for him to stop this fraud gap.
The Maytas deal was the last attempt to fill the fictitious assets

with real ones.

Rs 1,230 crore was arranged to Satyam, which is not reflected in

its books, to keep Satyam's operations running.

For this the promoter had to pledge the promoter shares and

raising funds from other sources.

After Satyam Scam Incidents

World bank announces ban for 8 yrs Dec 23 2008 4 Board members resigns in wake of Maytas controversy

Dec 28 2008
Due to these shares value come down to 5% Jan 03 2009 Mr. Ramalinga resigns and confessed iregulatries in book of

accounts of INR 71.36 Billion Jan 07 2009

How it was caught?

Infrastructure and

Maytas Properties as his last trick of the trade having failed.

This create a alleged

violation of corporate governance laws.

HOW GOVERNMENT KNOWS IT ?

Mr. Raju made a public confession of his misdeeds before

the national Press in Hyderabad.

The ministry of corporate affairs later ordered a probe into

whether the company violated any corporate governance laws while entering into such a deal involving share holders' money.

Unethical Business Practices In Satyam

Resorting to dishonesty, trickery or deception. Distortion of facts with a view to misleading or creating

confusion.
Manipulating executives emotionally by exploiting their

vulnerabilities.
Resorting to profiteering due to excessive greed. Resorting to money laundering.

 Over invoicing through false documents to show higher profits. Using political clout to avoid penalty or compensation for

unlawful act.
Damaging the environment by violating the government

prescribed norms for pollution.

Diverting through foul means from a public limited company to

family-owned concerns.
Abusing the legally constituted institutions such as boards of

directors, auditors and

Impact On Nation
Jobs of over 50,000 technocrats were at risk

Countrys booming economy feared slight collapse as

countrys gdp fell by estimated 0.4%

Indias it sector suffered downturn as its image was

tarnished globally

Impact on stock market

The benchmark Sensex slipped over 7% on Wednesday, 7

January 09.

Companies perceived to have poor corporate governance

standards were most affected.

The companys share price has fallen 21.3 per cent since

December 15, the day before the crisis broke.

Impact On Indian It Industry

It is surely going to be more difficult for other Indian IT

service players to win business.

Undoubtedly, this is going to hurt the prospects of foreign

money flowing into India.

Global perception about indian companies.

Indian stock market slipped over 7% on 7th Jan., 09.

Indias Step To Save Satyam

The Indian Government has stated that it may provide

temporary direct or indirect liquidity support to the company

Govt. has appointed new board of members for Satyam

consisting of heavy weights from India's corporate sector.

Satyam is seeking bank loans to help cover salaries and

other operating expenses

Who Will Acquire?

 Anand Mahindra, Chairman, Tech Mahindra, the new

owner of Satyam, will address the first board meeting of the company post the Rs 2,890-crore takeover, giving hope and future to Satyams 45,000-50,000 employees.
A moment of truth for Satyam and a victory for the

government and the regulators.

Governments Measures To Stop Such Type Of Fraud

SEBI should follow two distinct approaches - a preventive

one or a palliative approach.

The Central Government could introduce a simple and brief

Act
need to set up a Board of Audit, which like the Comptroller

and Auditor General of India, is empowered to conduct surprise audit

 Cross-directorships must be banned

If an auditor fails in his duty in India, he now faces a

ridiculous penalty of Rs 10,000 and a maximum of 2

years imprisonment

Importance Of Auditors
An official whose job it is to carefully check the accuracy of

business records.
An auditor can be either an independent auditor

unaffiliated with the company being audited or a captive auditor, and some are elected public officials
Auditors are used to ensure that organizations are

maintaining accurate and honest financial records and statements.

Role of External Auditor

Government Auditors
confirm the bank balances

sample checking of invoices

verifying the accrue interest on fake FDs Random inspection of companies whether they paid tax or

not

Role of Internal Auditor

Usually employees or contractors with the company

verification Cash and bank balances audit plans were prepared on the basis of the approval of the promoters

Help organization to understand & rectify their mistakes

Conclusion
Every company should have fraud detection mechanism.

Good Corporate Governance Good educational

background doesnt always mean individual has good ethics.

THANK YOU