Introduction

This research report deals with various aspects of forensic accounting. Forensic accounting is a new venture for expertise and a new field for Indian scholars. As with increase of multinational companies, fraud is also increasing. And to unravel the fraud in accounts and presenting it a substance of proof comes in action with this fraud and here the forensic accounting comes in action. In this report Satyam scandal has been taken to present and understand forensic accounting. Various accounting errors that were found in Satyam fraud and the way they were presented as a proof will help to understand the concept very well. In what became Indias biggest corporate scandal till date, Mr. Ramalinga Raju, founder and chairman of Satyam Computers Ltd., one of Indias four premier IT companies, admitted of afraud through a letter addressed to the board of the company in January 2009. The Fraud There was Rs. 5040 crores worth inflated cash and bank balance Non-existent accrued interest of Rs. 376 crores Understated liability of Rs. 1230 crores Overstated debtor position of Rs. 490 crores Overstated Revenues & operating profit by Rs. 588 crores

Added together, it was a discrepancy of Rs. 7724 crores in the accounts for a company havingannual revenues of Rs. 10,000 odd crores.Satyams share price crashed 77% to Rs. 40.25 on the news and the great story for a seeminglysuccessful Indian IT company ended. Fingers were pointed, concerns were raised, complaintswere filed and dreams were shattered.The government was quick to act, appointing a new board for Satyam

which helped carry outbidding process for the IT giant and saved the company from extinction. The Satyam fracas is one more fraud in the long history of misappropriation of resources given in trust to individuals and institutions. What this entire episode brings to the fore, is the following: Any control system is only as good as the people administering it

Motivation

The forensic Accountant is a bloodhound of Bookkeeping. These bloodhounds sniff out fraud and criminal transactions in bank, corporate entity or from any other organizations financial records. They hound for the conclusive evidences. External Auditors find out the deliberate misstatements only but the Forensic Accountants find out the misstatements deliberately. External auditors look at the numbers but the forensic auditors look beyond the numbers. Forensic accountant takes a more proactive, skeptical approach in examining the books of Accounting. They make no assumption of management integrity (if they can assume so then there is no need for their appointment) show less concerns for the arithmetical accuracy have nothing to do with the Accounting or Assurance standards but are keen in exposing any possibility of fraud. So by understanding the forensic accounting in simpler terms will help to understand its effective use in Indian terminology by taking account of Satyam Fraud, its accountability and presentibility . This report will also make aware the future prospects of the Forensic Accounts as a new era of professional demands to meet the supply of forensic accounts.

Objectives
Main Objective Understand Forensic Accounting Relate effectiveness of Forensic Accounting in case of Satyam Fraud.

Sub Objectives To Study future prospects of forensic accounting To study in details about Satyam Fraud and applicability of Forensic Accounting in various aspects.

Research Problem
This study relates Forensic accounting use in Satyam case. As Satyam was one of the biggest scams in Indian History and Satyam was one of the major players in IT field, all the financial statements are not published anywhere. only few financial statements can be found on various publication. So my report restricts on those Financial statements only. The period of and money evolved in research also limits my study. Forensic Accounting is a very vast field also new to me and its presentibility as proof under various IPC sections also limits my knowledge. So my research is based on very few statements and my basic knowledge about various aspects, hence this report should not be considered as a full trial of the scam.

Methodology of the project

Methodology means various methods that were applied to get a final processed output. Basically the data was collected from various sources like publications books and internet which is secondary data for computations. So in this project Secondary data is only considered for conclusion of my report. I think no questionnaire can be formulated for the topic as it is based on financial accounts and court trails. Case Study is used for study. Case study research excels at bringing us to an understanding of a complex issue or object and can extend experience or add strength to what is already known through previous research. Case studies emphasize detailed contextual analysis of a limited number of events or conditions and their relationships. Researchers have used the case study research method for many years across a variety of disciplines. Social scientists, in particular, have made wide use of this qualitative research method to examine

contemporary real-life situations and provide the basis for the application of ideas and extension of methods. Researcher Robert K. Yin defines the case study research method as an empirical inquiry that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used (Yin, 1984, p. 23). This research explains how to use the case study method and then applies the method to an example case study project designed to examine how forensic accounting was helpful to make Satyam a Culprit The study examines the issue of whether or not the Forensic Accounting is beneficial in some way to bring Multinational frauds in court. Many well-known case study researchers such as Robert E. Stake, Helen Simons, and Robert K. Yin have written about case study research and suggested techniques for organizing and conducting the research successfully. This introduction to case study research draws upon their work and proposes six steps that were used:

Determine and define the research questions Select the cases and determine data gathering and analysis techniques Prepare to collect the data Collect data in the field Evaluate and analyze the data Prepare the report

Step 1. Determine and Define the Research Questions The first step in case study research is to establish a firm research focus to which the researcher can refer over the course of study of a complex phenomenon or object. The researcher establishes the focus of the study by forming questions about the situation or problem to be studied and determining a purpose for the study. The research object in a case study is often a program, an entity, a person, or a group of people. Each object is likely to be intricately connected to political, social, historical, and personal issues, providing wide ranging possibilities for questions and adding complexity to the case study. The researcher investigates the object of the case study in depth using a variety of data gathering methods to produce evidence that leads to understanding of the case and answers the research questions. Case study research generally answers one or more questions which begin with "how" or "why." The questions are targeted to a limited number of events or conditions and their inter-relationships. To assist in targeting and formulating the questions, researchers conduct a literature review. This review establishes what research has been previously conducted and leads to refined, insightful questions about the problem. Careful definition of the questions at the start pinpoints where to look for evidence and helps determine the methods of analysis to be used in the study. The literature review, definition of the purpose of the case study, and early determination of the potential audience for the final report guide how the study will be designed, conducted, and publicly reported. Step 2. Select the Cases and Determine Data Gathering and Analysis Techniques

During the design phase of case study research, the researcher determines what approaches to use in selecting single or multiple real-life cases to examine in depth and which instruments and data gathering approaches to use. When using multiple cases, each case is treated as a single case. Each cases conclusions can then be used as information contributing to the whole study, but each case remains a single case. Exemplary case studies carefully select cases and carefully examine the choices available from among many research tools available in order to increase the validity of the study. Careful discrimination at the point of selection also helps erect boundaries around the case. The researcher must determine whether to study cases which are unique in some way or cases which are considered typical and may also select cases to represent a variety of geographic regions, a variety of size parameters, or other parameters. Step 3. Prepare to Collect the Data Because case study research generates a large amount of data from multiple sources, systematic organization of the data is important to prevent the researcher from becoming overwhelmed by the amount of data and to prevent the researcher from losing sight of the original research purpose and questions. Advance preparation assists in handling large amounts of data in a documented and systematic fashion. Researchers prepare databases to assist with categorizing, sorting, storing, and retrieving data for analysis.

4. Collect Data in the Field

The researcher must collect and store multiple sources of evidence comprehensively and systematically, in formats that can be referenced and sorted so that converging lines of inquiry and patterns can be uncovered. Researchers carefully observe the object of the case study and identify causal factors associated with the observed phenomenon. Renegotiation of arrangements with the objects of the study or addition of questions to interviews may be necessary as the study progresses. Case study research is flexible, but when changes are made, they are documented systematically. When a pattern from one data type is corroborated by the evidence from another, the finding is stronger. When evidence conflicts, deeper probing of the differences is necessary to identify the cause or source of conflict. In all cases, the researcher treats the evidence fairly to produce analytic conclusions answering the original "how" and "why" research questions. Step 6. Prepare the report Exemplary case studies report the data in a way that transforms a complex issue into one that can be understood, allowing the reader to question and examine the study and reach an understanding independent of the researcher. The goal of the written report is to portray a complex problem in a way that conveys a vicarious experience to the reader. Case studies present data in very publicly accessible ways and may lead the reader to apply the experience in his or her own real-life situation. Researchers pay particular attention to displaying sufficient evidence to gain the readers confidence that all avenues have been explored, clearly communicating the boundaries of the case, and giving special attention to conflicting propositions.

Forensic Accounting

Forensic

accounting or financial

forensics is

the

specialty

practice

area

of accountancy that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to give expert evidence at the eventual trial. All of the larger accounting firms, as well as many medium-sized and boutique firms, have specialist forensic accounting departments. Within these groups, there may be further sub-specializations: some forensic accountants may, for example, just specialize in insurance claims, personal injury claims , fraud, construction, or royalty audits. Forensic accounting students are studying for an exciting and challenging career: they will someday be responsible for investigating and preventing financial fraud. While they are still in school, they will be required to write research papers on forensic accounting. Fortunately for them, their chosen field is rich in potential research topics. The Failure of Statutory Audits
o

Although companies are legally required to be audited in order to detect financial fraud, audits do not always detect wrongdoing. The failure of internal and external audits has led to a greater need for forensic accountants to investigate fraud. One topic that could be examined is why

the statutory-audit system often fails to catch fraud, and how to improve it by improving forensic-accounting standards. Mega-Fraud Detection
o

News reports on huge multinational corporations that engage in massive fraud are sadly not uncommon. These swindles are usually on such a large scale that it is impossible for only one person to be the perpetrator. Such financial deceit is carried out by a team of people who have conspired to commit it. Forensic accounting students could research what safeguards are needed to catch wrong-doers before they cause irrevocable damage.

Country Case Studies

o

For students who are interested in the global state of forensic accounting, they might enjoy researching forepresentnsic-accounting standards in other countries. For example, China or India could be case studies in forensic accounting, especially when compared to the field in the US. In addition, a student could compare two different countries outside of the US, such as England and India. This type of report could provide insights into forensic-accounting practices around the world.

The Rising Popularity of Forensic Accounting

o

According to the The Journal of Forensic Accounting, there is anecdotal evidence to show that the popularity of studying forensic accounting is rising. Students could research whether this is true. And if true, what

factors are causing students to enter this field? Another related research topic is whether forensic accounting graduates are satisfied with the results of their education, have they found employment, and if they have, has it met their expectations?

Conclusions
The financial downfall of many a high profile companies which enjoyed a preeminent position leave the stake holders stunned and heart-broken. Even as the investigations are into the murky happenings of Satyam Computers, the investigators and regulators are curious about what precisely went wrong of a company which was the picture of financial health even a month before could suddenly plunge into one the worst financial crisis. With widespread financial scams reported the needle of suspicion is directed to the role played by the accountants and the auditors of the company. Here lies the importance of forensic accounting. This branch of accounting draws on the accounting and financial knowledge to solve civil and criminal cases. Given to the complex nature of financial and accounting issues, the importance of members of this profession who, with their expertise , are capable of detecting frauds well in advance to act as whistle-blowers.

References 1. 2. 3. 4. 5. 6. 7. 8. ^ Satyam ex-CFO Vadlamani Srinivas sent to judicial custody till ^ Satyam scandal could be 'India's Enron' - World business^ [1] ^ Satyam scandal rattles confidence in accounting Big Four ^ ICAI to seek explanation from Satyams auditor PwC ^ Satyam auditor says examining chairman's statement ^ What happens to PWC, The Auditor For Satyam? ^ Satyam: Auditors' body to pull up PwC ICAI to seek explanation

Jan 23 msnbc.com (updated 11:42 a.m. ET Jan. 7, 2009)

from Satyams auditor PwC

Annexure

Balance sheet
Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Sources of funds
Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus 235.30 1,230.40 1,925.90 235.20 1,230.50 2,061.70 134.80 1,230.40 -657.10 134.10 1.83 7,221.71 133.44 7.85 5,648.07

Loan funds
Secured loans Unsecured loans Total 31.50 3,423.10 42.00 3,569.40 641.00 1,349.10 23.67 7,381.31 13.79 5,803.15

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 2,020.40 1,406.70 613.70 268.30 532.10 1,818.90 1,285.90 533.00 373.00 726.60 2,155.30 1,404.40 750.90 389.50 93.00 1,486.53 1,062.04 424.49 458.63 493.80 1,280.40 930.45 349.95 290.05 201.15

Net current assets

Current assets, loans & advances 4,519.10 3,793.30 2,614.70 7,451.13 6,003.75

Mar ' 11 Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 2,510.10 2,009.00 3,423.10

Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 1,856.50 1,936.80 3,569.40 2,499.00 115.70 1,349.10 1,446.74 6,004.39 7,381.31 1,041.75 4,962.00 5,803.15

Notes:
Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity sharesoutstanding (Lacs) 532.10 1,365.80 11765.66 726.60 1,581.00 11761.86 93.00 2,350.73 6738.95 493.80 623.28 6704.79 201.15 267.20 6671.96

Profit loss account

Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Income
Operating income 4,780.80 5,107.60 8,432.50 8,137.28 6,228.47

Expenses
Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses 79.10 3,292.00 105.60 823.70 1.00 224.30 3,731.00 61.00 899.20 154.90 589.80 5,592.70 117.30 2,142.50 83.79 4,964.84 87.51 1,170.83 69.35 3,692.92 62.87 873.42

Mar ' 11 Expenses capitalised Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Non recurring items Other non cash adjustments Reported net profit Earnigs before appropriation Equity dividend Preference dividend Dividend tax Retained earnings 4,300.40 480.40 149.20 629.60 9.20 149.90 470.50 53.70 416.80 -584.10 39.70 -127.60 -2,462.20 -2,462.20

Mar ' 10 4,916.50 191.10 69.20 260.30 25.40 190.80 44.10 16.20 27.90 -99.10 -71.20 -2,334.60 -2,334.60

Mar ' 09 Mar ' 08 Mar ' 07 8,597.20 -164.70 10.60 -154.10 39.00 297.20 -490.30 150.70 -641.00 -1,073.80 -6,221.20 -7,936.00 -2,818.30 67.40 11.40 -2,897.10 6,306.97 1,830.31 277.87 2,108.18 5.94 137.94 1,964.30 226.12 1,738.18 -22.44 1,715.74 5,564.06 234.89 39.86 5,289.31 4,698.56 1,529.91 168.07 1,697.98 7.61 129.89 1,560.48 150.00 1,410.48 12.75 1,423.23 4,260.04 231.85 37.55 3,990.64

Cash flow
Mar ' 11 Mar ' 08 Profit before tax Net cashflow-operating activity Net cash used in investing activity Netcash used in fin. activity Net inc/dec in cash and equivlnt Cash and equivalnt begin of year Cash and equivalnt end of year -73.90 -177.20 375.50 -19.70 178.60 253.00 431.60 1,941.86 1,412.92 Mar ' 07 Mar ' 06 Mar ' 05 1,573.23 1,029.83 1,332.76 785.61 -53.85 -43.94 689.02 567.81 1,256.83 767.12 643.96 -341.18 -103.57 193.90 373.90 567.81

-641.22 -1,678.58 -227.79 501.86 651.41 1,153.27 34.10 -605.42 1,256.83 651.41