Assignment 1: Fraud Presentation

[Virtual Presenter] Good morning everyone I'm here to give a presentation about Satyam Computers and the accounting fraud of 2009. This presentation will address the background of the fraud the consequences it had and the steps taken to address the situation. I hope that by the end of this presentation you will have a better understanding of Satyam's accounting fraud and its implications for the global stock exchanges..

[Audio] We will examine the circumstances of a company that listed on a stock exchange in which accounting fraud occurred. We will investigate the multiple factors which enabled the perpetrators to falsify the company's financial records and the repercussions for shareholders patrons and the firm itself..

[Audio] Fraud schemes are becoming ever more advanced and causing sizable economic losses to organizations. This slide illustrates how intricate and pervasive these scams can be. The picture displays a typical intersection with the city lights glimmering on the rain-soaked road. The person with glasses and a mustache signifies the presence of the fraudster. Such criminals are constantly probing for new methods to defraud businesses and people. It is important to stay aware of the dangers and take the required safeguards..

[Audio] The Satyam Computers scandal reveals the necessity of corporate governance and vigilant oversight of key decision makers. In 2009 Ramalinga Raju Satyam's founder admitted a massive accounting fraud. The acts of fraud experienced were enabled by the lack of oversight within the organisation and the scant control by the board of directors. This serves to demonstrate the value of having procedures in place to prevent such immoral procedures and necessitate accountability..

[Audio] Ramalinga Raju founded Satyam Computer Services Limited in 1987 in Hyderabad India with only 20 employees. Despite its humble beginnings the company managed to expand rapidly and soon became a major player in the IT services industry with presence in 65 countries worldwide. Satyam made history after being the first Indian business to be featured on three renowned global stock exchanges the NYSE DOW Jones and EURONEXT..

[Audio] This slide looks at the consequences of the Satyam scandal a fraud that was labeled as one of India's most notorious corporate frauds. As part of the fraud Raju and a few others fabricated figures to make the company appear more successful by creating fake invoices and bank statements and inflating customer numbers. As a result the trust of the Indian business community was shattered and stock prices plummeted wiping out investor capital. Further workers were threatened as the company struggled to stay afloat. To prevent the company's collapse the Indian government intervened leading to significant reforms in corporate governance accounting practices and auditing regulations. Ultimately the incident highlights the crucial role that robust regulatory oversight ethical conduct and sound corporate governance plays in maintaining trust and integrity within businesses..

[Audio] The Satyam fraud case has been a difficult one to unravel however investigations have concluded that there are several people responsible. B Ramalinga Raju his brother and Satyam's former managing director former PwC auditors Subramani Gopalakrishnan and T Srinivas former chief financial officer Vadlamani Srinivas and Raju's other brother are mostly to blame for the fraud. Each of these individuals have been physically and legally accountable resulting in criminal charges for their part in the fraud..

[Audio] Raju and his team of executives were able to deceive all stakeholders for six years through a range of fraudulent activities. This included the creation of fictitious invoices bank accounts and even made-up staff members. In addition Raju funneled Satyam's money into his family's business Maytas and received substantial profits from real estate and other ventures. Despite the fraud Satyam's stock prices increased in 2008 from 10 to 544 Rupees and even won the Golden Peacock Award for corporate governance and social responsibility. It is important to remember that fraud does not always have to be financial in nature and that any kind of deception or misrepresentation of facts is considered to be fraudulent..

[Audio] Raju and Satyam's case is widely known as one of the most important business stories in India. In 2008 Satyam one of the biggest IT companies in the country was valued in the high range when Raju deliberately misled investors and others by providing false facts and data to raise the stock value from Rs. 10 to Rs. 544. However as the global financial crisis occurred in late 2008 the veil started to come off. This prompted a lot of debtors and creditors to ask for repaying the debts and the World Bank subsequently put a ban on Raju for eight years preventing him from taking part in any of its projects due to illegal employee benefits..

[Audio] In December of 2008 Raju who was desperate to save his failing business made an ill-fated bid of 1 point 6 billion dollars for Maytas using Satyam's financial reserves. This decision was met with vehement protests from Satyam's board of directors and shareholders as they viewed it as a clear case of conflict of interest and a financial diversion. After twelve hours Satyam's stock had plummeted by a staggering 55% and Raju had no choice but to admit his mistake. This sparked investigations from the Central Bureau of Investigation (C-B-I--) the Securities and Exchange Board of India (S-E-B-I-) and the Serious Fraud Inquiry Office (S-F-I-O-). Upon his apprehension Raju and his associates were accused of a number of serious crimes including insider trading money laundering breach of trust forgery criminal conspiracy and account falsification..

[Audio] The Satyam Computers scandal serves as a reminder of the devastating effects of corporate fraud that can shake the foundation of a company having a long lasting and far-reaching impact across all stakeholders. It highlights the importance of holding businesses accountable and safeguarding investments..

[Audio] Raju's letter of confession revealed that he had manipulated the financials of Satyam raising serious concerns about Indian auditing standards and procedures. This prompted further investigation of the external auditing firm Price Waterhouse..

[Audio] The Indian government's response in investigating the Satyam fraud was swift with their forensic accountants playing a key role in understanding the scope of the fraud. Their effort enabled the actual financial condition of the company to be mapped out and inconsistencies to be pinpointed. This hard work made it possible to hold perpetrators to account and to rebuild Satyam's reputation..

[Audio] Fraudulent activities like the Satyam scam cause grave consequences. When the truth was exposed Satyam's stock price plummeted evoking scrutiny from investors analysts and governmental bodies. The abrupt plunge in market value raised red flags and prompted a sequence of forensic investigations which uncovered the fraud. In response to the scandal many amendments to corporate governance protocols were put into effect seeking to enforce precise surveillance transparency and responsibility..

[Audio] In the case of Satyam the Indian penal laws resulted in the founder and former chairman Ramalinga Raju and other significant executives being detained and charged with forgery cheating and criminal conspiracy. Not only were those implicated brought to justice but Satyam also received financial penalties and fines from Indian regulatory bodies and their auditors Price Waterhouse for not discovering the fraud..

[Audio] The Satyam scandal had a wide-reaching and devastating impact resulting in investors and shareholders losing significant amounts of money and the company losing the faith of many of their clients. To attempt to resolve some of these cases Satyam offered settlements and compensation to those affected though with varying sums..

[Audio] Following the Satyam scandal reforms were implemented with the intention of increasing corporate governance standards providing more transparency and accountability to company directors and auditors. After all legal and financial procedures were concluded the company was acquired by Tech Mahindra..

[Audio] The recent Satyam scandal has drawn attention to the importance of "auditor independence and objectivity" in order to ensure a proper audit process. Questions have been raised about the relationship between PricewaterhouseCoopers (P-W---) and Satyam's management and the potential implications this could have had on their ability to conduct independent audits and expose any potential irregularities. Clearly trust in external auditors must be restored and the audit process must be more comprehensive and independent..

[Audio] External auditors play a critical role in detecting fraud and trust is essential for this relationship. Following the Satyam scandal in 2009 regulators have consequently increased their oversight of external auditors in order to ensure stakeholders get correct financial information. These reforms were introduced to enhance auditor independence audit quality and transparency while also restoring faith in the auditing profession and avoiding similar situations in the future..

[Audio] We should investigate credible sources for information on fraud such as the Financial Times The Wall Street Journal Bloomberg Reuters sebi and the Serious Fraud Investigation Office. Additionally we can also view official statements by the Government of India..

[Audio] I would like to express my appreciation for being listened to. I hope this presentation gave you some understanding on how fraud can occur. To secure our money and safety it is necessary to be careful. I would particularly like to thank Ms Momal Khan for providing her assistance and aid in creating this presentation. Thank you..