COURSE NAME:

AUDITING AND FINANCIAL REPORTING

PRESENTED TO:
SHAGUFTA SHAHEEN,
ASSISTANT PROFESSOR,
DEPARTMENT OF BANKING & INSURANCE.

THE SATYAM PRESENTED BY:

MD. MEHEDI ROMAN-37
SCAM-2009 PORNA MURIEL ROZARIO-131
SUMAIYA ISLAM ASHA-85
SWARNALY BISWAS-171
TABLE OF CONTENTS
• Introduction

• Founder

• The Rise of Satyam

• People Behind The Scam

• The Scam

• Impacts of Satyam Scam

• Regulatory Actions Taken

• Steps Taken After Scam

• Result of the Satyam Scandal

• Conclusion
 INTRODUCTION
• Founded in 1987.
• Converted into Public Ltd Co. in 1992.
• Offers Consulting & Information Services Spanning Various Sectors.
• Mahindra Satyam is Ranked #153 by Fortune India 500 in 2011.
• Satyam Network Covers 66 countries 53000 employees across 6
continents.
Founded by Ramalinga Raju
who came from Andhra
Pradesh

FOUNDER
Chairman Until January 7, 2009.
Resigned from Satyam Board
after admitting corporate fraud.
THE RISEN OF SATYAM
• 1987: Satyam Computers Pvt. Ltd. Born.
• 1991:June, First Fortune 500 Clients.
August, Converted into Public Ltd. Co.
• 1994:The Big Break-Allies with Dun and Bradstreet Corp. Declared
one of the 100 most pioneering technology companies by The World
Economic Forum.
• 2000: Dataquest IT Man of the Year Award
 PEOPLE • Ramalinga Raju
BEHIND THE Satyam Former Chairman
SCAM

• V Rama Raju • V Srinivas

Brother of Ramalinga Raju, Ex-Chief
Former Managing Director
Financial
Ex-Chief Financial Officer.
Officer.

• S Gopalakrishnan • Talluri Srinivas

Price Waterhouse Auditor Price Waterhouse
Auditor
THE SCAM
• The Andhra Pradesh police arrested Rau and his
brother on several charges.
• Raju has misled various investors.
• Raju has also used Dummy Accounts to trade in
Satyam shares.
• Raju has violated the insider trading norm.
• Funds from Satyam were diverted to Mayas.
THE SCAM
• On 22 January 2009; CID found that the actual
amount of employees in Satyam is 40000 and
Mr. Raju allegedly withdraw 20 crore money
for non-existing 13000 employees.
• Raju wanted to take over his MAYAS INFRA &
Mayas Properties.
• He was blamed that he was using the fund of
investors for the family business.
 HOW THE SCAM REVEALED
• Stock markets around the world collapsed during 2008 BSE fell from 21000 to
below 8000.
• The losses caused investors to withdraw money from the stock market
• Satyam continued their positive result in 2008, even during the economic crisis
• In October 2008, Satyam reported a net income of 132.3 million dollars, an
increase of 28 percent from the same quarter of the previous year.
 HOW THE SCAM REVEALED
• Satyam asserted that despite the challenging environment, it continued to find
opportunities for growth.
• During October, One stock analyst drew attention to large cash balances in non-
interest-bearing bank accounts & expressed concern about the large balances
and the accuracy of the numbers.
• Investors ignored the analyst and the stock price rose after the reports of positive
earnings and revenue growth.
• In December 2008, the Board of Directors approved the purchase of Maytas
Properties and Maytas Infrastructure, two companies unrelated to the
information technology field.
 HOW THE SCAM REVEALED
• At the same time, Mr. Raju and the Board anticipated that the market would be
delighted by the two transactions as it would provide Satyam with greater
diversification.
• However, investors are outraged over the transaction because Mr. Raju's family
held a larger stake in Maytas Properties and Maytas Infrastructure.
• Shareholders viewed the transaction as an attempt to siphon money out of
Satyam into the hands of Raju's family.
• Satyam quickly aborted the transactions, but the incident still caused significant
damage to Satyam's reputation as a well-managed company.
 HOW THE SCAM REVEALED
• After the incident, Satyam's share dropped nearly 10% and 4/5 independent
directors resigned.
• On December 30, an analyst with Forrester Research advised clients to stop
doing business with Satyam because of the fear of widespread fraud.
• Satyam hired Merrill Lynch to advise it on ways to increase shareholder value.
• On January 7, just before Mr. Raju disclosed the fraud, Merrill Lynch sent a
letter to the stock exchange that it found accounting irregularities.
• On January 7, 2009; Mr. Raju sent a letter to the board that he manipulated the
companies accounts for number years .
IMPACTS OF SATYAM'S SCAM

• Jobs over 50000 were at risk

• India's global image was suffered
• India's stock market fell dramatically
• Biggest single-day fall of 175 rupees on Jan 6th in Satyam share.
• The New York stock exchange halted trending in Satyam Stock.
• GDP fell by 0.4%
• IT sector suffered a downtown.
REGULATORY ACTION
• The New Board of Directors was appointed.
• Disclosure of pledged securities.
• Increased financial accounting disclosure.
• Adoption of international standards.
• Creation of a new corporate code of conduct by the Ministry of Corporate Affairs.
 STEPS TAKEN AFTER SATYAM SCAM
• Introduction of new rules by the market regulators, making it compulsory for
promoters of companies to disclose the percentage of shares by them to
lenders.
• Appointed independent auditors and company secretary by company law
board of audit of any private organization.
• Set up 5 member committee to suggest how to implement effective
compliance and corporate governance in the private sector by CLB.
CONCLUSION
More scandals like Satyam can be avoided :
• If the auditing firm is honest.
• SEBI plays an active role.
• Periodic review of legal compliance reports by independent direct
THANK YOU