Satyam Case - 1707 Words

CASE STUDY: MARCH 2012 SEMESTER I. Analyze the case and respond to the following questions: a) Discuss the earnings management techniques employed by the management of Satyam. Earning management or creative accounting is referred to the manipulation or misrepresentation of the company’s financial earnings in order to achieve stable and positive financial position. This was achieve through directly or indirectly use of the accounting methods. Even though the manipulation may follow all the accounting standards and laws, they may go opposite of what the standards and laws were originally trying to establish. Therefore, earning management is often considered materially misleading and referred to a fraudulent activity. Satyam†¦show more content†¦Because of the pressure situation, he finally decided to come into decision to manipulate the company’s earnings and engaged in fraudulent activities. The other factor that motivated Satyam to manage their earnings is due to the need to maintain a competitive position within the financial market. Satyam Computer Services is among of the top leading company in Indian IT industry. If Satyam fails to shows that company is operating in profitable manner and he discloses the real loss of the company it will cause the investors and public loss confidence in them. Therefore, they will not be able to place the company’s name as the leading company of IT services and unable to compete with the other top leading IT companies. Because of this reason, Ramalingam Raju had engaged in fraudulent activities. In addition, factors that may motivate managers of Satyam want to manage their earnings is because of their personal gains such as bonus and they might be belief that the laws and regulations can be easily be bypassed. The managers will be rewarded with bonus if the company shows a high profit. So in order to get the bonus Satyam was motivated to commit fraud. Since earning management was a complex techniques that are not easily to trace, this make Satyam feel confident that involving in earning management will not be caught. But as the consequences, due to too much gap between the real earnings figures with the reported earnings figures, Satyam was not be able to hide theShow MoreRelatedSatyam Fraud Case1505 Words   |  7 PagesViews on the Satyam fraud case: Before writing this report, I read some articles from The Economic Times, The Times of India, The Hindu and a blog by Shweta Rajpal. In this report, I have tried to figure out what the scam is all about, how it happened, why it was done and the aftermath, exploring corporate governance issues simultaneously. The ‘What’ of the scam: The Satyam scam has been as the Enron scam of India. So one can only imagine the magnitude of wrongdoing and deception. The downfallRead MoreSatyam Case Study992 Words   |  4 PagesIn early 2009 the chairman of Satyam Computer Services admitted publicly to a fraud taking place in the company. Satyam reported in the financial statements billions of dollars in profits and cash assets that never existed. The public auditor’s responsible for auditing the financial statements of Satyam Computer Services at the time was PW India, an affiliate of Pricewaterhouse Coopers. The Securities and Exchange Commission determined that Satyam was able to commit the financial statement fraudRead MoreCase Study : The Satyam Scam799 Words   |  4 PagesAishwarya Gokhale The Satyam Scam Studies suggest that there are four basic factors that lead to fraud. First, is the opportunity to commit fraud, second, the incentive to commit fraud, third, the rationalization of the fraudulent act and fourth, the capability to commit the fraud. 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