Question

Identify a case of corporate fraud by finding a current event or by researching historical cases. After finding a case, complete the following in your initial discussion post: Briefly summarize the case, including what happened, who was involved, and what damages were incurred. Note how the fraud was detected and discuss any red flags that appeared prior to detection. Could an accounting and finance system have helped deter this fraud? If yes, how? If no, why not? Are there any specific business policies and procedures that could have been in place that would have prevented the fraud from occurring? Explain. Embed course material concepts, principles, and theories, with citing sources

Answer 1

One of the major cases of corporate fraud is a scandal that happened in India back in 2009, i.e the Sathyam Computer Services Scandal, where the companys chairman at last confessed that its accouts had ben falsified. On January 7, 2007, Byrraju Ramalinga, the chairman of Sathyam Computers Confessed that the companys accounts were window dressed and around $1906 dollars was involved.

PricewaterhouseCoopers were their auditors when the scandal was found out. The Indian wing of  PwC was fined $6 million by the SEC for not following the auditing standards while auditing the company. By 10 April 2015,  Byrraju Ramalinga Raju was convicted with 10 other members.

It is a fraud that involved lying about the company's financial health. Account balances were blown up such as inflating profit and revenue, to mislead that the company was in good finacial health. Fake invoices and bills were used and a web of companies were used to divertfunds from Sathyam. The promoters of the company sold the shares at inflted rates.

The scam came to and end when Byrraju Ramalinga Raju himself admitted to the Securities and Exchange Board of India (SEBI) and his company’s shareholders, that he had manipulated the company’s accounts and fooled the investors. Nearly 95% of the companys assets were fictitious. Later, Raju describes the process as "like riding a tiger, not knowing how to get off without being eaten."

The scandal could have easily been detectd by the if proper care had been taken taken by the auditors and a better financial system had been incorporated in the company. In this scandal the auditor blindly believed the bank statements they were given, and they were fabricated . This points out to the fact that the auditors should not blindly believe the ststements provided but rather they should check the authenticity of statements provided.

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