Why satyam

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The gap was simply too big to fill! By now whistleblowing attempts were also starting to arise. Company director Krishna Palepu received anonymous emails from the alias Joseph Abraham. The mail exposed the fraud. Palepu forwarded it to another director and to S. Gopalkrishnan a partner at PwC — their auditor.

Gopalkrishnan assured Palepu that there were no truths in the mail and a presentation would be held before the audit committee in order to assure him on 29th December. The date was later revised to 10th January Despite this Raju had a last resort. The plan included a takeover of Maytas by Satyam which would bridge the gap that had accumulated over the years. The new financials would justify that the cash had been used to purchase Maytas.

But this plan was foiled after shareholder opposition. This forced Raju to put himself at the mercy of the law. Raju later mentioned It was like riding a tiger, not knowing how to get off without being eaten. The next big question while studying this big scandal is how was Ramalinga Raju able to get away with the Satyam Scam in a company of over 50, employees?

PwC was the external auditors to the company and it was their duty to examine the financial records and ensure that they are accurate. It is surprising how they did not notice fake bills after auditing Satyam for almost 9 years. There were multiple red flags that the auditors could have caught upon. Firstly a simple check with the banks would have revealed that the bills were not valid and the cash balances were overstated.

Secondly, any company with that big of cash reserves as Satyam would at least invest them in an interest yielding account. But that was not the case here. Despite these obvious signs, PwC seemed to be looking the other way.

Suspicion towards PwC was later increased when it was found out that they were paid twice the fees for their services. PwC was not able to detect the fraud for almost 9 years but Merrill Lynch discovered the fraud as part of their due diligence in merely 10 days.

Two days after the confession was made Raju was arrested and charged with criminal conspiracy, breach of trust, and forgery. The shares fell to Rs. The CBI raided the house of the youngest Raju sibling where sales deeds to different land purchases were found. The CBI also found 13, fake employee records created in Satyam and claimed that the scam amounted to over Rs. PwC initially claimed that their failure to catch the fraud was due to the reliance placed by them on information provided by the management.

PwC was found guilty and its license was temporarily revoked for 2 years. Investors too became vary of other companies audited by PwC. The news of the scam led to the Sensex falling by 7. In , the board of directors expressed that the idle money in the FDs be invested, one that the Raju brothers decided to invest in Matyas, another holding of the Raju family.

It was a last resort to match the statements between Satyam and Matyas, which the stakeholders opposed. Following this, Raju and ten others were arrested with three partial charges, consolidating into a single charge sheet. From Rs. Products IT. About us Help Center. Log In Where do you want to login? Sign Up. Income Tax Filing. Expert Assisted Services.