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Accounting Fraud at Satyam Computers

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Submitted By beatthegmat2009
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Accounting Fraud at Satyam Computers

March 04, 2011

Satyam Computers Services Limited was a consulting and an Information Technology (IT) services company founded by Ramalingam Raju in 1988. It was India’s fourth largest company in India’s IT industry, offering a variety of IT services to many types of businesses. Its network spanned over 46 countries, across 6 continents and employed over 20,000 IT professionals. On 7th January 2009, Satyam scandal was publicly announced and Ramalingam Raju confessed and notified SEBI (Securities and Exchange Board of India), which is the Indian equivalent of SEC, of having falsified the account.

Raju confessed that Satyam’s balance sheet of 30 September 2008 contained inflated figures for cash and bank balances of Rs 5,040 crores (US$ 1.04 billion) [as against Rs 5,361 crores (US$ 1.1 billion) reflected in the books], an accrued interest of Rs. 376 crores (US$ 77.46 million) which was non-existent, an understated liability of Rs. 1,230 crores (US$ 253.38 million) on account of funds which were arranged by himself and an overstated debtors’ position of Rs. 490 crores (US$ 100.94 million) [as against Rs. 2,651 crores (US$ 546.11 million) in the books].

Deriving high stock values allows the promoters to enjoy benefits allowing them to buy real wealth outside the company and thereby giving them opportunity to derive money to acquire large stakes in other firms on another hand. This could be the reason Raju’s family build its shareholding and shed it when required.
The scandal came to light with a successful effort on the part of investor’s to prevent an attempt by the minority shareholding promoters to use the firm’s cash reserves to buy two companies owned by Raju’s family i.e. Maytas Properties and Maytas Infra. As a result, this aborted an attempt of expansion on Satyam’s part, which in...

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