What is Manipulation

 Alternation of figures
 Intentional Omission of events
 Intentional Omission of
Accounts
 Presentation of inadequate
Disclosures
 Misapplication of Accounting
Policies
Needs For Manipulation

Meet Dead lines

Competitions
Executive Bonus
Happy investees
Tax Evasion
Personal Benefits
Increase Earning Per Share
USES OF FINANCIAL STATEMENTS

 Company
 Financial Position
 Decision Making
 Investors
 Evaluate Risk
 Financial View
 Financial Institutions
 Amount of Loan
 Interest Rate
Company Name
BUSINESS PLAN PRESENTATION
 B. Ramalinga Raju

 Founder Of the Company

 Chairman of the company
 MBA from OHIO University
 Master of Economics from Loyola College
 Awarded by IT Man of the year in 2002
 Wins Ernst And young Entrepreneur award in 2007
 Become MD in 1991
 ACCOOUNTING POLICIES

 International Financial Reporting

Standards (IFRS)
 United States Generally Accepted
Accounting Policies (USGAAP)
 Indian Accounting Standards
 International Accounting Standards (IAS)
 COMPANY PROFILE
 Established in 1987 to provide services in IT sector
 Listed in BSE, NSE, NYSE, and EURONEXT
 India's fourth biggest company in the same sector
 First IT company world wide certified under ISO 9001-2000
 One among top 10 employers in India
 Winner of corporate Citizen Award for best Corporate Social Responsibilities
 Wins Golden Peacock Award for excellence in corporate Governance
 Hold 9 percent of market share
 Provide employment to 53,000 IT professionals in 6 Continents
 Maytas Infra

 Mr. Teja Raju son of Ramalinga Raju

holds 36.64 percent
 Institutional holding is 10.92 percent
 Company raised 3,274.5 million through
IPO
 Turnover of Rs. 16,600 million
 Net profit 100 crore
 Satyam Decided to acquire 51 percent of
Maytas STAKE OF $ 0.3
 Maytas Property

 It was Established in 2005

 Owner of 35 percent of stake Maytas
Property is with Raju’s family
 Has land bank of 6800 acres
 Had clearness of three IT SEZs based on
148 acres
 BOD of Satyam decided to acquire 100
percent shares of Maytas Properties with
$ 1.3 billion
Time line

 In 2006 Satyam’s Revenues cross ONE billion US dollar

 21st of April 2008 Satyam becomes FIRST Indian company publish International
Accounting Reporting Standards
 On 22nd of September Stayam awarded by Golden Peacock for excellence in
Corporate Governance
 On 18th of December Board of Director gave approval to acquire two firms
Maytas Infra and Maytas Properties
 Majority of Stake of both company are held by Raju’s family
 As soon As Satyam announced that the share of this decrease by 55% in NYSE
with in 12 hrs
Time Line

 19th of December Centre refers Satyam deal To Registrar of the Companies (RoC)
 20th of Dec British Mobiles Solution suit for unpaid files Motion against Satyam
and Promoters for INR 55 Billion claiming fraud and faced a penalty of ONE
billion dollars
 23rd of December 2008 world bank impose a ban of 8 years for data theft and
briber
 26th of Dec first Independent Director Manglam Srinivasan resigns from satyam’s
Board
 28th of December 2008 THREE more Board members resign in wake of Maytas
controversy
Time line

 Maytas Infra raise $500 millions through sale of equities and properties after the
cancelation of deal
 3rd of January 2009 promoters stakes decreased from 5 percent of total stake and
reached to 3.2 percent
 6th of January 2009 total pledged shares were sold by the IL&FS
 Although promoters stake decrease to 3.2% company further Pledged 1.7%
 On the 7th of Jan 2009 Mr. Raju resigns and confesses financial regulations in the
book of accounts to the turn of INR 71.36 billion
 Why On 7th OF Jan 2009

 Before the night of 7th Jan DSP

Lynch informed to SEBI about
material irregularities in Accounts
 Minutes of meeting of board of
director held on 6th of Dec 2008 were
not submitted to Registrar RoC
 Hearing of unpaid Satyam’s case on
8th of Jan 2009 at the US court
 Maytas Acquisition

Series 1
9000
 Valuation of Maytas Stake is 1.6 billion 8000
US dollars 7000
 But the Actual value of its stake is 225 6000
million Us dollars 5000
 This is the Violation of Section 372-a of 4000
Indian’s company Act 3000
2000
1000
0
 Inflated Income Statement

Actual Reported Difference

Cash and Bank Balance 321 5,361 5,040

Accrued interest Nil 376.5 376.5
Understated liabilities 1,230 None 1,230
Overstated Debtors 2,161 2,651 490
Total - - 7136
 Share Pledging
 Stake of promoters decrease from 21.6% to 3.6%
 Graph sowing Money raised through FOUR front Co.

Bangar Angro

Amravati

Narayandri

Harangi Agro

0 20 40 60 80 100 120 140 160 180

 Raju ban gaya conman.......How?

 Proposing High risk Maytas acquisition

 Overvaluing the proposed acquisition
 Pledging the Promoters stake
 Refusing to resign
 Inflating the income statement
 Response

 Maytas Stocks value decrease and hit the

lower point
 Satyam shares fell to lowest level of Rs.
11.5
 In New York feel from $29.1 to $1.8
 Stock price of pwc also decrease
 Mahindra Satyam

 On 13 April 2009, via a formal public auction process, a

46% stake in Satyam was purchased by Mahindra &
Mahindra owned company Tech Mahindra, as part of its
diversification strategy. Effective July 2009, Satyam
rebranded its services under the new Mahindra
management as "Mahindra Satyam"
 Company Profile

 PricewaterhouseCoopers (trading as PwC) is a multinational professional

services firm headquartered in London, United Kingdom. It is the world's largest
professional services firm and the largest of the "Big Four" accountancy firms
measured by 2012 revenues
 In 1998, Price Waterhouse merged with Coopers & Lybran
 In 2000, PwC acquired Canada's largest SAP consulting partner Omnilogic
Systems
 Europe and North America account for about 76% of PwC's annual revenue
 Auditor’s Responsibility

 Auditor is a third party appointed by the Board of directors to check that

Financial Statements are providing true and faire view
 It is Auditor’s responsibility to check that proper accounting policies are followed
or not
 One of the important duty of the auditor is Validate the cash and bank Balances
 To report to the Members of the Company that the statements are providing true
and fare view
 To check the information provided by the Management is true or not
 To detect Fraud and Errors
 Auditors Liability

 Auditor fails to Detect Frauds for 8 years

 Auditor failed verified the Cash and bank Balances
 Auditor complied on the information provided by the Management
 It’s Auditor’s primary responsibility to Check that Statement s are
providing true and Faire View or not
 In this case auditor failed or even write a single comments on this in
his reports
 Action Against PWC

  Chartered accountants regulator ICAI issued show-cause notice to Satyam's

auditor PricewaterhouseCoopers (PwC) on the accounts fudging.
 ICAI wrote a letter to PwC on 8 January and seek an immediate reply on the issue
and inform them about the process of investigation,
 ICAI has finally found Vadlamani Srinivas, erstwhile chief financial officer of
Satyam Computers, and Talluri Srinivas, former partner of PWC, then statutory
auditors of Satyam, guilty of professional misconduct
 Vadlamani was found guilty of not conducting proper due diligence, Talluri was
held guilty for not complying with professional standards. 
STEPS TAKEN BY THE GOVT

 On 5 February 2009, the six-member board appointed

 A.S. is appointed S ne CEO Of the firm
 Electrical Engineer since1994
 Head of Global Delivery Section

 The two-day-long board meeting also appointed Homi Khusrokhan (formerly

with Tata Chemicals) and Partho Datta, a Chartered Accountant as special
advisors.
 13th of Jan 2009 Government Hands Satyam case to SFIO
“ Clearly state your company’s
long term mission.

Try to use words that will help direct the growth of your company, but be as concise
as possible.
”
Corporate Governance

 Corporate Governance is typically percieved as dealing withnthe problems that

result form the Sepration of leadership from Control
 Share holders
 Board of directorrs
 Management
 Employees
Parties In Corporate Governance

Shareholders

Employees

Management

Bankers

Government
 Governance issue at Satyam arose because of no fulfillment of obligation of the
company towards the various stakeholders. It proved a poor relationship with all
the stakeholders.
 It is well known that a shareholder has a right to get information from the
organization, such information could be with respect to the merger and the
acquisition
 Shareholders expect transparent dealing in an organization they even have right to
get the financial reporting and records
 In this case these are points are not followed the acquisition of the Maytas
groups was announced with the consent of the shareholder
 •Employees were shown with a inflate figure.
 The excess of employee s in the organization were kept under VIRTUAL POOL
who received just 60% of their salaries and several were removed.
 Questions were raised over the credibility of management
 Any organization has its obligation towards the Government by means of timely
payment of taxes and abiding by the rules and laws frame dup by the Government
.As per the case with Satyam, the company did not pay advance tax for the
financial yea r2009 .As per the rule, the advance tax is to be paid 4 times a year
;such was not full filled
 Improper benefits to bank staff and failed to maintain the proper records
 Black list by the World bank over charges of Bribery