How To Prevent Another Satyam Like Fraud Accounting Essay

Satyam a number one international enterprise and data Expertise Firm, delivering consulting, programs integration, and outsourcing options to purchasers in over 20 industries.

Satyam Laptop Companies Ltd was based in 1987 by B.Ramalinga Raju.

The corporate provides data expertise (IT) providers spanning numerous sectors, and is listed on the New York Inventory Trade and Euro subsequent.

Satyam’s community covers 67 international locations throughout six continents.

The corporate employs 40,000 IT professionals throughout improvement facilities in India, america, the UK, the United Arab Emirates, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia.

It serves over 654 international firms, 185 of that are Fortune 500 companies.

Satyam has strategic expertise and advertising alliances with over 50 firms.

Aside from Hyderabad, it has improvement facilities in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam

The Fraud

Simply three months in the past, India’s fourth-largest software program providers exporter, Satyam Laptop Companies acquired a Golden Peacock World Award from a bunch of Indian administrators for excellence in company governance.

Ramalinga Raju himself was the recipient of many an award for company governance and transparency

The fraud has dropped at gentle the truth that in India the excellence between homeowners and administration continues to be not very clear.

The place the homeowners are additionally the managers, such frauds are all the time a risk.

Satyam is the largest fraud in India’s company historical past.

The corporate administration, primarily disgraced chairman B Ramalinga Raju, saved everybody — seemingly — at nighttime for a decade and tarnished shining India’s picture horribly, is as stupefying a truth because the Rs 7,800 crore (Rs 78 billion) rip-off itself.

The corporate’s account books mentioned that Satyam had over Rs 5,000 crore billion (Rs 50 billion) within the financial institution, when it didn't. Raju mentioned that he had been fudging the account books for ‘a number of years’ and regardless of this nobody however he, and his brother, knew of this.

Satyam Rip-off isn't one thing that can shatter the peace and tranquility of Indian Public. Criminals, who've swindled billions of Rupees and proudly proclaimed the identical to the world at massive, usually are not even thought-about worthy to be detained for questioning by the Police at that cut-off date. However the investor, whose hard-earned cash has been swindled by these criminals, is rounded up by the Police for exhibiting disrespect to them exterior their den.


There are few axioms that all of us work with, typically it's believed that there's a sure stage of wholeness in these we take care of. With out belief it's virtually tough to transact enterprise. The Satyam case corroded the person religion in enterprise.

Now, with this case, it will be tougher for different IT service gamers to broaden themselves. Rivals from different low value international locations equivalent to China, Vietnam, and Japanese Europe are taking or will need to have taken benefit with the scenario. And likewise would damage the international cash flowing into the nation as properly.

Sues to be Taken

To stop and detect fraud additional in a company, there must be clear understanding that why folks commit fraud, or to check primary components of fraud. Though understanding fraud isn't a tough job however to detect it and to research that why staff take part in fraud isn't straightforward.

To check Fraud, investigators or firm ought to activate to “FRAUD TRIANGLE”

The Fraud Triangle supposes that folks commit fraud as a result of they:

Face a private strain

Understand a possibility to alleviate that strain with out getting caught

Can rationalize or justify their fraudulent actions

It is very important be aware that the world the place a company can do essentially the most fraud prevention is within the sphere of alternative. This space is the place good inner controls and management with integrity will present a company with essentially the most advantages.

Actions the Audit Committee Can Take to Deal with the Threat of Administration Override

Cultivating a Vigorous Whistleblower Program

Encourage the event of a tradition through which staff view whistle blowing as a priceless contribution to a beautiful office of integrity and their very own futures.

Workers shouldn't really feel like “tattle-tails” or “rats” for speaking potential fraud.

The automated and direct submission to the audit committee, of all complaints involving senior administration (with out filtering by administration or different entity personnel) is crucial

Interact inner auditors to periodically consider the design and working effectiveness of the hotline.

Growing a Broad Info and Suggestions Community

Develop an intensive data community together with:

Inner auditors

Impartial auditors

Compensation committee

Key staff

Common counsel

HR director

Compliance officer

Threat administration officers

Divisional managers and controllers

“Strolling the halls”

Contemplate assembly periodically with representatives from every of the teams to debate issues affecting the monetary reporting course of.

Inconsistencies in data obtained from sources might sign that administration override of inner controls is current.

Info obtained could also be helpful in brainstorming session.

Utilizing the Code of Conduct to Assess Monetary Reporting Tradition

Use the Code as a benchmark for assessing whether or not the tradition or “tone on the high” and administration’s actions are these required to keep up the best ranges of integrity beneath strain and alternative to commit fraud.

The audit committee must be routinely furnished with the outcomes of any surveys of staff concerning company habits and comparable data obtained from exterior events.

An analysis of how administration communicates details about the Code and motivates staff to adjust to the Code gives data reflecting the tradition or attitudes about moral habits throughout the group

Code Violations

Make sure that Code violations are pursued

As a part of an efficient compliance program

Board “practices what it preaches”

Consulting and Auditing By a Frequent Group

In Satyam’s case auditing and consulting was finished by the identical firm which was the strongest purpose for rip-off.

Prevention is….

Inner auditing, many inner auditors at the moment discover themselves performing a wider spectrum of actions than ever earlier than. Particularly, the addition of consultative providers to the inner auditor’s outlined set of competencies has launched a wholly new dimension to the career. Audit practitioners who at one time targeted largely on measuring, evaluating, and reporting on the effectiveness of inner controls at the moment are increasing their function by working with managements on methods to enhance operations and add steady worth to the group. By offering consulting providers, many auditors are serving to to make sure that administration sees the audit perform as important to attaining organizational objectives and targets.

Though consulting work gives many new alternatives for inner auditors, it might probably additionally pose a menace to the audit perform if the transition towards guide auditing isn't managed fastidiously. Particularly, consulting might jeopardize inner auditing conventional function because the board’s trusted, impartial, and impartial monitor of administration’s actions. The board might discover that auditing consulting work with administration impacts its potential to assessment administration exercise objectively and to offer the board with an unbiased appraisal. Failure to successfully serve the board’s wants might harm auditing credibility and, in some organizations, in the end result in downsizing–and even outsourcing–of the audit perform.

The problem, then, is for inner auditors to offer consulting providers to administration with out compromising their function as monitor for the board

The Workplace of the Metropolis Auditor has embraced the brand new definition of inner auditing and gives each assurance and consulting providers for the town.

For instance, they usually render each varieties of providers throughout our audits of main information-technology initiatives. As monitor, they supply assurances to the fee on venture compliance with metropolis insurance policies and procedures, threat administration and venture controls, and venture standing and accomplishments up to now. As guide, they provide recommendation and counsel to administration regarding threat and controls, they assess the quantity and competency of metropolis employees and vendor employees, and we establish and supply route for important milestones that have to be achieved as initiatives transfer ahead.

Their audit crew realizes the potential battle of curiosity which will come up as we carry out consultative providers for administration. They subsequently took proactive steps towards managing the potential pitfalls and leveraging the alternatives offered by our added providers.

To make sure the success of their consulting efforts, in addition to the continuing effectiveness of their assurance work, their workplace has applied a variety of measures to assist forestall conflicts between our function as monitor for the fee and guide to administration. The next initiatives symbolize a few of the efforts that contributed towards our technique for achievement.


They warning themselves, throughout conferences and at different occasions, to stay conscious of the nice line that always exists between consulting and precise administration exercise. As a bunch, they assist one another to find out the place this line is drawn on particular person assignments and be sure that they don't carry out administration capabilities or make administration choices when collaborating as a part of a crew. They're additionally cautious to keep away from creating even the looks of performing administration duties, as perceptions concerning the character of their work have to be managed simply as fastidiously because the precise work they carry out.

Their place on this difficulty is that consulting providers — as outlined by The IIA and applied by the Requirements for the Skilled Follow of Inner Auditing — symbolize audit work and that such work falls beneath the broad umbrella of the definition of inner auditing. So long as they carry out these providers in accordance with The IIA’s Attribute and Efficiency Requirements for consulting, they see no battle with both Authorities Auditing Requirements or current authorities guidelines or regulation. Moreover, a lot of the exercise we carry out as consultants could be seen as a efficiency audit in Authorities Auditing Requirements as a result of their work gives a foundation for conclusions, suggestions, and opinions.


Along with holding face-to-face conferences, they issued a letter to the town management crew (government administration), the town fee, and the town audit committee that defined the brand new definition of inner auditing and described the peace of mind and consulting providers supplied by our workplace. The letter additionally assured the fee that it could obtain copies of all audit reviews, as earlier than, however famous that administration could be thought-about the first shopper for consulting providers. They felt it was vital to speak this in writing so that a document would exist of our efforts to start educating members of the group about their new function and to arrange them for change. They needed to construct belief in any respect ranges of metropolis authorities, to distance ourselves from the normal view that auditors have an “I acquired you” mentality, and to display their need to observe points to a optimistic decision. Moreover, to spotlight the differing providers they supply to every celebration, they state in our audit reviews that feedback of a consulting nature are offered for the fee’s data and for administration’s additional evaluation and determination.