(i)RELEVANT FACTSFictitiousaccount Fictitious account isthe account that is not real or not exists been recorded by irresponsiblepersons. Ramalinga Raju and the company head internal auditors falsified thefictitious invoices and account using his personal computer. The reasons theydo the fictitious accounts are to inflate the company revenue and to inflatethe amount of balance sheet. Corporate governanceissuesCorporategovernance is the system that shows how well the company are directed andcontrolled. In this Satyam scandal, they have very poor corporate governancepractices in the company.

They also failed to show the good relationshipbetween the employees and the shareholders. Based on the facts given, this isdue to they did not perform their responsibilities well.OverstatedAssets on Balance SheetsOverstated assets are the reportedamount is more than the true amount in the financial report. Mr. Raju claimedin the letter he disclosed that the overstated assets on Satyam’s balance sheetby $1.47 billion. This is because the company wants to show good performance oftheir company and meets the analyst expectation which is their shareholder.

    (ii) ETHICAL DILEMMAAsset and profitabilityAssetis a property own by the company either tangible assets or intangible assets. Meanwhile,profitability is the ability of the company to gain profit from their businessactivity. Based on Satyam Scandal, the Chairman, Ramalinga Raju claimed that heoverstated the revenue and assets of Satyam Computer Services Limited. He alsounderstated the company’s liabilities.

The action cause the company providedfalse information of their revenue, assets and liabilities to have a goodperformance. This is due to achieve the expectation of their analyst andstakeholder who have shares onto the company.Corporate governance Corporategovernance is the rules, practice, and ethics provided by the company thatshould be followed by the individual that work in the company. Based on SatyamScandal, the company has a very poor corporate governance practice in thecompany. It is shows when the top management of the company includes the headof internal auditors and the CFO of the company also been charges of fraud.They were guilty of professional misconduct. Poor corporate governance willlead the company to easily do fraud and not performing the duties in ethicalways. CompetitionCompetitionis a rival between the companies in a same industry to achieve their companygoals such as achieve higher profit, higher market share and higher salesvolume.

Satyam Computer Services Limited is the excellent company in Indiaoutsourced IT-service industry. They won many awards on their excellentperformance. In maintaining the company performance, Ramalinga Raju makes fraudby doing the creative accounting that cause massive fallen for Satyam ComputerServices Limited.

The reasons of the chairman to do fraud are because toprotect the company reputation and to become the top of IT-service Company inIndia. Self-interestSelf-interestis a personal interest of individual to achieve their interest withoutinfluence from others people. As a chairman of Satyam Computer ServicesLimited, Ramaliga Raju have the responsibility to discharge his duty by fulfillthe expectations of the analysts. Ramalinga Raju, should perform hisresponsibility in ethical ways. But in Satyam Scandal, it is shows thatRamalinga Raju makes fraud by using the company assets to buy the stake inMaytas infrastructure and all of Maytas Properties for his family members atcost of $1.6 billion. This action made by him is based on his self-interest tohave an asset in the wrong ways and greed to be rich.(iii) STAKEHOLDER ANDTHEIR ETHICAL OBLIGATIONSIndependentAuditorIndependent auditor is an independentaudit or examination of the financial records, accounts, business transactions,accounting practices and internal control by an independent auditor without anypersonal interests.

The Auditor who auditing the Satyam Company which is PWCwere become an auditor for this company for 9 years but unable to detect anyfictitious made by the Director of this company, B. Ramalinga Raju. This hasbecome a doubt for Merrill Lynch and they are able to discover the fraud for 10days as part of its diligence. This has shown that PwC were allowing the Satyamto commit fraud after they have received twice payment from other firms chargefor the audit procedures should receive.

DirectorDirector is a person who will lead andcontrol the management of the company. The director of Satyam, Ramalinga Rajuis the one who responsible to maintain a good reputation of the company andbeing a fair person towards the members of the company. This is because thedirector must promote success of his company in order to attract shareholder toinvest with their company and also gives benefit to its members as a whole.GovernmentGovernment is the representative ofsociety with the authority to govern a country or a state. The government ofIndia need to protect the interests of the investors, safeguard the credibilityof their country and the nation’s image across the world. This is because thegovernment wants to prevents any similar related issues might happened in thefuture if they did not start to prevent at current such as the governmentre-write the corporate governance rules and tightened the norms for auditorsand accountants.ShareholderShareholder is the individual or companywho finance the Satyam by investing money for them.

The shareholder willcontinue financed the company based on the results of their financial report.This is because the shareholders have right to made decision to sells of theirshares with Satyam after they acknowledge about the fraud had been committedand this has caused the Satyam’s shares fell to 11.50 rupees which is theirlowest level of shares price.(iv)CORE (PROFESSIONAL) VALUES/VIRTUESIntegrityIntegrity is company must be honest, have strong moralprinciples and being straightforward.

In this case, Satyam Computer ServicesLimited must be honest and straightforward in providing information for the useof user. Satyam shall provide appropriate evidence for every transaction occurin the financial statement. For example, every invoice, bank statements,assets, loans and liabilities incurred shall be provided with the receipt orinvoice as an evidence for transaction incured by Mr. Ramalinga Raju, Satyam’sChairman.

This is because to fulfill the interest of user and stakeholder byproviding an honest, true and fair view of information for their usage to makedecision making processes.ObjectivityObjectivity is free from bias and personal interest. Inthis case, Satyam Computer Services Limited shall have no personal interest andevery information disclose in financial statement shall be free from bias.Satyam’s chairman,Mr Ramalinga Raju need to make a decision based on approvalwithin the shareholder despite having an approval by the management itself. Inthis case, the directors of Satyam went ahead with the management’s decisionwithout concerning any appoval or opinion of their shareholders upon theproposal to buy the stake in Maytas Infrastructure and all of Maytas Propertiesin which they were owned by the family members of Mr Raju as fully ownedsubsidiary for $1.

6 billion. This is because to avoid any judgement or decisionmade to fulfill their own interest without concerning other’s opinion. Thus, itis to ensure that the director made a relevance decision for the companywithout being bias towards chairman’s family members owned propertiescompanies.ConfidentialityConfidentiality is protection of private information frombeing disclosed to the public. In this case, Satyam Computer Services Limitedshall protect their private information from being leaked to the public’sknowledge.

Mr Raju shall not diclosed any of revenue earned, assets andliablities of company to the public eventhough he did some creative accountingonto several of element in financial statement. Despite the overstated assets,fictitious claims on bank loans and cash, underreported liabilities andfalsification of bank accounts, Satyam shall not disclose these information asit will affect the reputation of company. This is because, fraud done bycompany will give impact in the whole industry and country itself.Nevertheless, company shall not disclose private and important information topublic in order to prevent the acknowldgement by competitors on the uniquenessof company.

ProfessionalbehaviorProfessional behavior is the professionalism and having aspecific knowledge and skill. In this case, Satyam Computer ServicesLimitedshall practice professionalism, skill and knowledge in producingfinancial statements. Satyam’s chairman,Mr Ramalinga Raju shall not have anypersonal interest and perform his responsibilities in accordance to skill andknowledge within his job scope. He shall not greed for money, power, competitionand success whereas he shall focus his job in accordance to the originalresponsibility. He also need to take into consideration for the approval ofboth management and shareholder in any decision making process in the company.This is because professionalism of the management including the chairmanhimself potrays the image of the company. Therefore, it is crucial for thecompany to maintain the image of the company so that they can attract moreinvestor to invest in the company and increase the revenue of the companyitself.Professionalcompetence and due careProfessional competence and due care is the professionalaccountant shall undertake responsibilities in accordance to their skill andknowledge.

In this case, Satyam Computer Services Limited’s professionalaccountant shall do their job accordance to the knowledge acquired. MrRamalinga Raju shall perform his responsibility to ensure that all fudiciaryduties are met and to ensure the top management have high ethical and moralstandards. Fudiciaries includes the duty of care, the duty of negligence, theduty of loyalty and the duty of disclosure towards the stakeholders. This isbecause Satyam need to ensure their shareholder and customer due care areproperly maintained in order to protect and to fulfill their interest. Thecompany will get loyalty from shareholder and customer when their interest arebeing fulfilled and this will increase the performance of company asshareholder will continously giving fund for the company to conduct thebusinesses.(v) OPERATIONAL ANDACCOUNTING ISSUESOPERATIONAL ISSUESThe World Bank bannedSatyamBannedis officially prohibited to do something that they cannot do.

Based on thiscases, Satyam had been banned from conducting their business for 8 years whichwill effect their company performance. This issue also had contribute to thequit of four independent director from the Satyam board. It is because, theindependent director does not want to take any responsibility towards thisissue.Satyam’s share pricefallShareprice is the price per saleable share of the company that will attract theinvestors or shareholder. Impact to this case, Satyam’s share decline to 11.50rupees on 1 January 2009 from 544 rupees in 2008 .

It is the lowest price forSatyam since March 1998. Because of that all of Satyam’s investors lost about2.82 billion dollar in that year.

ACCOUNTING ISSUES FraudFraudis the unethical behavior that carried out by individual. They will manipulatethe data information according to their own interest. Satyam scandal isbasically based on the fraud cases. Based on this cases, Mr. Ramalinga Raju whois the Chairman and Founder of Satyam is the major player of performing fraudin the company. Mr. Raju had disclosed all of his fraud in a letter consists ofhe overstated the assets, understated the liabilities and also overstated theincome of the company. Fraud happen because of Mr.

Raju’s greed for money,power, competition, success and prestige and he will do anything to gain it.Failure of auditor Auditoris an individual that carry out the audit procedure to provide audit report andopinion on whether the financial statement of the company are free from anymaterial misstatement. PricewaterhouseCoopers (PwC) is the external auditor forSatyam’s company in a period of 9 years from 2001 until 2009. In this case,there are some individual that gives comment on the failure of PwC to detectfraud happen in Satyam. This is because, PwC are being paid twice by Satyamrather that other audit firm being charged. It is also can be relate with theprofessionalism of PwC itself where they do not act professionally even though  PwC is one of big audit firm in the world.

(vi) CONSEQUENCES OFTHE ETHICAL OPTIONSCompany share priceeffectedShareprice is the price of single share depends on the number of saleable stocks ofa company.  Company’s stock price willreflects investor perception of its ability to earn and grow its profit in thefuture. If the company stock price increases, the market value willincrease.  Satyam company stocks shareprices were reduce from the highest of 544 INR to lowest of 11.50 INR Effect on Indian StockMarket  (SENSEX)SENSEXor the full form is Sensitive Index, is figure shows the respective prices of shares on the Mumbai (Bombay)Stock Exchange.  The market weightedstock index of 30 companies is choosen on the basis of financial soundness andperformance. During the scandal, the Sensex of Satyam company fall by 749.

05points and nifty50 by 192.40 pointsCompany net worthreduceNetworth is a concept that relate to individuals and businesses as a key measureof how much an entity is worth. Net worth is the amount which assets exceed theliabilities. A consistent increase in net worth indicates good financialhealth. In Satyam case, company net worth reduced from 11464 crores INR  to 1607 crores INRBad CorporateGovernanceCorporategovernance is a guideline on how the company should be directed and controlledto fulfill its goals and objectives.

This to adds value to the company andbeneficial for all stakeholders in the long term. Satyam scandal is an effectof accounting scandal. The financial statements were manipulated and forged byintentional omissions and by intentional misapplication of accounting policies.Severe penalty to thekey playersPenaltyis a punishment for breaking a law or rule. In Satyam scandal, Ramalinga Rajuwhich is the founder of Satyam Computer Services and nine others get 7 years ofrigorous imprisonment and fined by 5 crore INR.  

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