Fraud- Satyam Computers Limited, India Research Paper - 1

Fraud- Satyam Computers Limited, India - Research Paper Example From being the fourth largest IT Company, with high profile, the outsourcing company has been embroiled for having the biggest scam in history. Formed in 1987 by Ramalinga Raju, the company grew and become a ‘rising star’ in Indian ‘outsourced’ computer service industry. With the rising importance of IT in the market, the company realized an estimated compound growth rate of 6.4% by 2007. The company attracted a lot of investors and it grew significantly. Raju, the managing director, attracted up to 300 customers worldwide and 13, 120 technical associates. A year later, the company had shown a compound growth rate of 35% and earnings per share rose from $0.12 to $0.622. On the other hand, Satyam’s stock tripled to 300%. The company further generated a significant growth as well as increased shareholder value. In 2009, Raju, through a letter to the company, disclosed that he had been manipulating the accounting numbers of the company for several years. He further claimed that he had overstated the assets on the company’s balance sheet by $1.47 billion and to make the matters worse, almost $1.04 billion cash and bank loans claimed by the company was not-existent3. The company had underreported all the liabilities on the balance sheet and overestimated the income for several years so as to meet the expectation of the analyst. For instance, the results showed 97% profits and 75% revenue increase. The director and the firm’s global head of the internal audit used various schemes to perpetuate the fraud. Raju used his personal computer to develop several bank statements and falsified the accounts so as to inflate the non-existent balance sheets. In fact, he inflated income statements by making interest claims using fake bank accounts. As the scam revealed further, it was evident that Raju had created over 6000 counterfeit salary accounts and directed the money there anytime the company make deposits.