Analysis Of satyam scandal and talk about ethical behaviour

1. SATYAM SCANDAL Presentation by- Swapnil Mali RohitDeshmukh VipinBhosale

2. After Scandal You Can Say 2 MITSOT System (2011-13)

4. Literature Review

5. Findings and Analysis

6. Conclusions and Further Research3 MITSOT System (2011-13)

8. World is not only just going through economic crisis but also ethical crisis with the Corporate frauds, Accounting scandals, Mismanagement, Bribes and many more.

9. Present Situation

10. Purpose of Study

11. Importance of Ethics4 MITSOT System (2011-13)

12. Description of terms Code of Conduct GAAP 5 MITSOT System (2011-13)

13. Uses of Financial Statements 6 MITSOT System (2011-13)

14. What is manipulation 7 MITSOT System (2011-13)

15. Terms Used 8 MITSOT System (2011-13)

16. Need for manipulation 9 MITSOT System (2011-13)

19. Better market position

20. Happy investors

21. More revenue

22. Better market position

24. Less TAX10 MITSOT System (2011-13)

26. So to make Assets > Liabilities :Overstate assets than actual Showing fictitious deposits in bank and also interests on it Hiding your Liabilities E.g. Not showing all the loans , hiding unpaid bills 11 MITSOT System (2011-13)

27. MITSOT System (2011-13) 12 Literature Review SATYAM SCAM What is Satyam ? - Company Background What happened ? - Accounting Scandal How did it happen ? Scandal Analysis

28. MITSOT System (2011-13) 13 Literature Review SATYAM SCAM What is Satyam ? - Company Background What happened ? - Accounting Scandal How did it happen ? Scandal Analysis

29. MITSOT System (2011-13) 14 Company background SATYAM SCAM What is Satyam ? - Company Background

31. 4th fastest growing IT company in India.

32. 9 % market share

33. 53,000 employees

34. Revenue $2.1 billion

37. Stance over 66 countries across six continents.

38. Satyam serves Fortune 500 Companies which are 163 in number out of its 558 global companies.

39. Exports account for almost 75.9 per cent of its total sales revenues.

41. International Financial Reporting Standards (IFRS)

43. MITSOT System (2011-13) 20 Accounting scandal SATYAM SCAM What happened ? - Accounting Scandal

44. MITSOT System (2011-13) 21 What happened ? Satyam board announces the decision to buy stake in Maytas infrastructure a company owned by the promoter family of Satyam for INR 65 Billion Satyam announces a board meeting on Dec 29th says it will consider buy back to keep investors trust Sale of Pledged shares of promoters result in the promoter stake in Satyam coming down to less than 5% World Bank confirms an 8 year ban of Satyam for data theft and bribery Dec 23 2008 Jan 03 2009 Dec 16 2008 Dec 18 2008 Dec 19 2008 Jan 07 2009 Dec 28 2008 Dec 17 2008 Unpaid files motion against Satyam and promoters for INR 55 Billion claiming fraud Satyam calls of the Maytas deal as a result of investor revolt. 4 Board members resign in wake of Maytas controversy . Market speculation talks of hostile take over by peers Mr. Ramalinga Raju resigns and confesses/cites financial irregularities in the book of accounts to the tune of INR 71.36 Billion.

45. MITSOT System (2011-13) 22 Literature Review SATYAM SCAM What is Satyam ? - Company Background What happened ? - Accounting Scandal How did it happen ? Scandal Analysis

46. MITSOT System (2011-13) 23 Scandal Analysis SATYAM SCAM How did it happen ? Scandal Analysis

47. MITSOT System (2011-13) 24 Satyam + PwC Ramalinga Raju – CEO created INR71.36 billion in fake billing and cash PwC auditors missed cash accounts?

50. Question Raised ? MITSOT System (2011-13) 27

51. MITSOT System (2011-13) 28 Investors Investors

52. Investors Investors play an important role in detecting financial position of a company. Investors must ensure that the share value which is listed is genuine and as per its financial status. Institutional investors should take more responsibility. Information about the company should be latest, from trusted source, easily accessible and correct. New regulation for information Act. Investors should take more care before investing. No risk involved if CEO is the founder of the company.

53. Board Must monitor the ethical policies and the way they are being maintained in the company. Accountable for the financial information being projected. No to inactive board members. Authority to independent board of directors. Clear understanding of responsibility between the board and next level employees. Qualified Board members.

54. Government Regulations, Policies and intervention Government should always plays an active role in the company affairs because the company runs with the public money. The government must frequently check the company’s performance in the market and take necessary steps in curtailing any malpractices or falsification. Government is not taking any corrective measures in case of any violations If the auditor do their work sincerely then any balance sheet and income statements would show the fair value of the company’s financial records. Government intervention must be increased to have a foolproof mechanism in the company policy matters.

55. Accounting Standards Auditors main responsibility is to check fairness and trueness of financial statements. Proper Audit Tools. Freedom for auditors Reputation of auditing firm/individual can’t avoid scandals. Most of the companies involved in mega scandals were audited by reputed auditing firms.

56. Ethics of Individuals/Company, Defining and implementing code of conduct Search or Nominations Committee Proper code of conduct updated on regular basis should be implemented. Every company should have fraud detection mechanism. Good Corporate Governance Good educational background doesn’t always mean individual has good ethics. Whistle blowing policies

57. MITSOT System (2011-13) 34 Result of scandal

58. A Tale of Two Frauds Then : December, 2001 Now : December, 2008

59. Failure of Auditors

60. Role of External Auditor The auditor did not confirm the bank balances independently The various protocols were violated Two set of Confirmation No sample checking of invoices Liability against tax not reported Extra-ordinary payment of audit fee Not verifying the accrue interest on fake FDs Not verifying the TDS on accrued interest Not doing end to end audit Systems were found to be lax and same was not taken up for rectification

61. Role of Internal Auditor MITSOT System (2011-13) 38 The auditor did not do beginning to end transactions verification Cash and bank balances were not verified Fake invoices were ignored The matter was not reported to Audit Committee The audit plans were prepared on the basis of the approval of the promoters Serious findings of the auditing team were ignored by the audit team leader

62. MITSOT System (2011-13) 39 Questions and Discussion