By: _ _ _ _ _

Q1)

DISCUSS THE CIRCUMSTANCES UNDER WHICH THE SAT YAM SCAM WAS EXPOSED. WHAT ACCORDING TO YOU WERE THE REASONS OF THE FRAUD?

Answer

Circumstance: Failure of Maytas acquisition Reasons for fraud: Low profit margin Maintenance of share price Prevention of takeover Situation gone out of hand

Q2)

COULD THIS FRAUD HAVE BEEN PREVENTED? WHO COULD HAVE PREVENTED IT?

Answer

Fraud could have been prevented Parties who could have prevented it: Board of Directors Auditors Bankers

Q3)

CRITICALLY EVALUATE THE CORPORATE GOVERNANCE MECHANISMS ADOPTED BY SAT YAM.

Answer

IFRS compliance Leader in HR policies Awards for best corporate governance One of 10 most well-regarded Indian companies Clients list included one-third of Fortune 500 companies

Q4)

ASSESS THE RESPONSIBILIT Y OF THE AUDIT COMMITTEE AS WELL AS INTERNAL AND STATUTORY AUDITORS IN RELATION TO SAT YAMS SCANDAL.

Answer

Main role of auditors is to assess truth and fairness of financial statements To verify veracity of assets and liabilities in the balance sheet Implicit contract of faith and trust with investors and other stakeholders Watchdog of companies on behalf of government

Q5)

EVALUATE THE STATEMENT MADE BY THE CHAIRMAN IN HIS RESIGNATION.

Answer

Letters tone tried to make it seem like a noble, selfless act Conveyed the details of fraud as if the letter was an annual report Tried coming across as a victim of circumstance instead of mastermind fraudster Absolved family from all knowledge of his wrongdoing Had courage to dictate post-disaster course of action

Q6)

WHAT CHARACTERISTICS OF THE BOARD OF DIRECTORS PLAY A ROLE IN PREVENTING FINANCIAL STATEMENT FRAUD?

Answer

Board should be accountable for financial reports projected More power to independent directors Directors must have an active role Must do their own due diligence rather than take CEOs word for granted

Q7)

DO YOU THINK THAT MAKING REGULATORY CHANGES WOULD HELP IN PREVENTING THE FRAUD?

Answer

Institute strong internal controls Internal auditors must report directly to board Government must ensure that statutory audit must be done by neutral, unbiased party A need for surprise audits by tax authorities in big companies

Q8)

WHAT IS THE LESSON LEARNED FROM THIS CASE?

Answer

Importance of corporate governance Regulations to stop such frauds 3 fold audit team failed Despite having 5 independent directors failure to catch fraud Lack of governance at multiple levels
The board The bank SEBI Auditors