Creative Accounting Scam at Satyam Computer Limited: How the Fraud Story Unfolded?

Keen to project a perpetually rosy picture of the Satyam to the investors, employees and analysts, Mr. Raju (CEO and Chairman) manipulated the account books so that it appeared to be a far bigger enterprise than it actually was. The Satyam fraud has shattered the dreams of different categories of investors, shocked the government and regulators alike, and led to questioning of the accounting practices of statutory auditors and CG norms in India. An attempt has been made to provide an explanation for various “intriguing” questions about Satyam scam, such as: What was the need to commit a fraud on such a large scale? How Raju managed to cook-up books? What was Raju’s real modus-operandi to manipulate the accounts for eight years? Why was Raju forced to blow his own whistle? Why was not there a stricter punitive action against the auditors of Satyam PwC?, etc.” Now, after thorough investigations done by the CBI and SEBI, they have unveiled the methodology by which Satyam fraud was engineered. Finally, we recommend that “CA practices should be considered as a serious crime, and as such, accounting bodies, law courts and other regulatory authorities in India need to adopt very strict punitive measures to stop such unethical CA practices”.

The present study of Satyam provides a "snapshot" of how Mr. Raju "master-minded" this maze of CA practices. Undoubtedly, the Satyam scam is clearly a glaring real-life corporate example of abuse of CA, in which the account books were cleverly manipulated by following the modus-operandi of creating fake invoices, inflating revenues, falsifying the cash and bank balances, showing non-existent interest earned on fixed deposits, showing ghost employees, and so on. This type of CA is both illegal and unethical. In its recent indictment of the former promoters and top managers of Satyam, various investigative agencies (viz., SEBI, CBI, CID, SFIO, etc.) in India had finally provided minute and fascinating details about how India's largest corporate scam at Satyam was committed. An attempt has been made by the author, based on the media reports, to provide a description about the CA methodology used by the Satyam to commit the accounting fraud duly supported by evidence, wherever possible.

Case Study of Creative Accounting Scam at Satyam
The Satyam Computer Services Limited (hereinafter, "Satyam"), a global IT company based in India, has just been added to a notorious list of companies involved in fraudulent financial activities. Satyam's CEO, Mr. B. Ramalingam Raju (hereinafter, "Raju"), took responsibility for all the accounting improprieties that overstated the company's revenues and profits, and reported a cash holding of approximately $1.04 billion that simply did not exist. "This leads one to ask a simple question: How does this keep on happening for five years, without any suspicions?" asked Bhasin [1]. So, while Raju ran his fraud, the auditor slept, the analysts slept, and so did the media. To be fair, the media and a whistle-blower did an excellent job of exposing Raju and his many other "shenanigans" after he had confessed [2]. In his letter (of Jan. 7, 2009) addressed to board of directors of Satyam, Raju showed the markers of this fraud "pathology". Now, more than six years later, the final decision in the Satyam scam has been made and all accused charge-sheeted in the case have been awarded punishment by the Court.
Satyam was a "rising-star" in the Indian 'outsourced' IT-services industry [3]. The company was formed in 1987 in Hyderabad (India) by Mr. Ramalinga Raju. The firm began with 20 employees, grew rapidly as a 'global' business, which operated in 65 countries around the world. Satyam was the first Indian company to be registered with three International Exchanges (NYSE, DOW Jones and EURONEXT). Satyam was as an example of India's growing success; it won numerous awards for innovation, governance, and corporate accountability [4]. As Bhasin [5] commented, " From 2003From -2008 in nearly all financial metrics of interest to investors, the company grew measurably, as summarized in Table 1. Satyam generated Rs. 25,415.4 million in total sales in 2003 -2004. By March 2008, the company sales revenue had grown by over three times. The company demonstrated an annual compound growth rate of 38% over that period. Similarly, operating profits, net profit and operating cash flows growth averaged 28,33 and 35%, respectively." Thus, Satyam generated significant corporate growth and shareholder value too. The company was a leading star (and a recognizable name) in a global IT marketplace. Unfortunately, less than five months after winning the Global Peacock Award, Satyam became the center-piece of a "massive" accounting fraud. Bhasin [6] further add- number of different techniques to perpetrate the fraud [7]. As Ramachandran [8] pointed out, "Using his personal computer, Mr. Raju created numerous bank statements to advance the fraud. He falsified the bank accounts to inflate the balance sheet with balances that did not exist. He also inflated the income statement by claiming interest income from the fake bank accounts. Mr. Raju also revealed that He created 6,000 fake salary accounts over the past few years and appropriated the money after the company deposited it." Here, Bhasin [9] pointed out, "The Satyam's global head of internal audit created fake customer identities and generated fake invoices against their names to inflate revenue. The global head of internal audit also forged board resolutions and illegally obtained loans for the company." It also appeared that the cash that the company raised through American Depository Receipts in the United States never made it to the balance sheets [10]. profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations -thereby significantly increasing the costs. Every attempt made to eliminate the gap failed.
As the promoters held a small percentage of equity, the concern was that poor performance would result in a take-over, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas' investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam's problem was solved, it was hoped that Maytas' payments can be delayed. But that was not to be. What followed in the last several days is common knowledge.
I would like the Board to know: as company operations grew significantly. Every attempt to eliminate the gap failed, and the aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones" [12]. But the investors thought it was a brazen attempt to siphon cash out of Satyam, in which the Raju family held a small stake, into firms the family held tightly. Fortunately, the Satyam deal with Maytas was "salvageable". It could have been saved only if "the deal had been allowed to go through, as Satyam would have been able to use Maytas' assets to shore up its own books." Raju, who showed "artificial" cash on his books, had planned to use this "non-existent" cash to acquire the two Maytas companies. To conclude, Bhasin [13] said, "the greed for money, power, competition, success, prestige etc. compelled Raju to 'ride the tiger', which led to violation of all duties imposed on him as fiduciaries: the duty of care, the duty of negligence, the duty of loyalty, and the duty of disclosure towards the stakeholders."

Satyam Fraud Methodology Unveiled
The unfolding of Satyam sage has been a watershed event in the Indian corporate history. According to the founder's own public confession, Satyam had inflated its reported revenues by 25%, its operating margins by over 10 times, and its cash and bank  The key puzzle the CBI was trying to solve was also about the claims of Raju, as per Jan.

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7, 2009 letter, infusing Rs. 1230 crore into the company. According to Bhasin [1], "In fact, these numbers were made-up. The actual revenues were Rs. 2112 crore, with an operating margin of Rs. 61 crore (or 3% of the total revenues). So, Satyam had made a profit of Rs. 61 crore but was declaring a profit of Rs. 649 crore. The difference was Rs. 588 crore. The operating profit for the quarter was added to the cash and bank balances on the balance sheet. Hence, cash and bank balances went up by an 'artificial' Rs. 588 crore, just for the three month period ending Sept. 30,2008. This was a formula that Raju had been using for a while." First, Satyam over-declared its operating profit. Once this fudged amount of operating profit was moved to the balance sheet, it ended-up over-declaring its cash and bank balances. And this led to a substantially bigger balance sheet than was actually the case. The company had total assets of Rs. 8795 crore, as on September 30, 2008. Once the Rs. 5040 crore of cash and bank balances that were simply not there were removed from this, the "real" total assets fell to a significantly lower Rs. 3755 crore.

Cooked-Up Books of Accounts
So, how did Raju managed to boost revenues? Here, Bhasin [17] provides an explanation as: "In order to do this, Raju created fictitious clients (to boot sales revenue) with whom Satyam had entered into business deals. In order to record the fake sales, Raju introduced 7000 fake invoices into the computer system of the company. Since the clients were fictitious, they could not make any real cash payments. Therefore, the company kept on inflating the money due from its fictitious clients (or what Raju called debtors position in his letter).Further, once fake sales had been recorded fake profits were also made and reported in accounts. Ultimately, the fake profits brought in fake cash, which therefore, needed to be invested somewhere. This led Raju to creating fake bank statements (showing forged fixed deposit receipts), where all the fake (or non-existed) cash that the company was throwing up was being invested. Finally, Raju tried his best to use this "fake cash" to buy out two real-estate companies, called Maytas Properties and Maytras Infra (both promoted by the family members) for a total value of $1.6 billion. The idea was to introduce in company accounts some "real" assets against all the "fake" cash that the company had managed to accumulate, so far. Unfortunately, that did not happen, and after this, Raju had no other way out but to come clean. So, Raju finally confessed about fudging the accounts in his Letter." While the Satyam accounting scam, which involved unethical and illegal CA tactics, was to the tune of Rs. 8,000 crore. Shockingly, the scam had caused an estimated notional loss of Rs. 14,000 crore to investors and unlawful gains of Rs. 1900 crore to Ramalinga Raju and others.
The balance sheet of Satyam(as on September 30, 2008) carried an inflated (non-existent) cash and bank balances of Rs. 5040 crore, non-existent interest of Rs. 376 crore, and understatedly ability of Rs. 1230 crore. In fact, the balance sheet carried an accrued interest of Rs. 376 crore, which was non-existent.

Falsification of Bank's Fixed Deposits Accounts
The promoters of Satyam regularly used to generate monthly bank statements to be fed into the bankbooks. Similarly, they also used to generate confirmations of bank balances, at the end of every quarter, against non-existent fixed deposit receipt (FDRs) and interest earned/due thereon. As Bhasin [19] commented, "From the records of Satyam, as well as, the books held with the auditors, it was noted that two sets of letters of con- 1.32 crore. And so on. Providing an explanation, Bhasin [20], described the motto and rationale for the process as, "Fake FDs had to be generated since fake business had to be shown to the stock markets, which meant the creation of fake customers and fake invoices from these businesses. Fake businesses generated fake revenues which, in turn, created the illusion of fake profit margins, and, finally, fake cash in the bank. Satyam apparently was very poor on its business fundamentals-with margins being low in many quarters, including negative margins in some quarters." Indeed, falsification with regards to fixed deposit have been done since 2001-02 till 2007-08 and also for the quarter ended June 2008 and Sept. 2008. Further, Bhasin [16] observed, "All the misleading actions of window dressing and camouflaging created a

Fake Invoices and Billing System
By using the IT skills in-house and tampering with the invoice management system (IMS) of the company, a software module that was internally developed states (Bhasin) [21]. The Central Bureau of Investigation (CBI) has revealed details of the fake invoicing system used by Satyam. Documents released by two media reports [22] [23] to the general public in India showed how the company's standard billing systems were subverted to generate "false" invoices to show "inflated" sales, before its former boss, Ramalinga Raju, admitted to his role in the India's largest-ever corporate scandal. The investigators had used cyber forensics to uncover how in-house computer systems were exploited to generate fake invoices. Regular Satyam bills were created by a computer application called "Operational Real Time Management (OPTIMA)", which created and maintained information on all company projects. The "Satyam Project Repository (SRP)" system then generated project IDs; there is also an "Ontime" application for entering the hours worked by Satyam employees; and a "Project Bill Management System (PBMS)" for billing. An "Invoice Management System (IMS)" generated the final invoices. From the above, an intriguing question that arises here is: "how were the fake invoices created by subverting the IMS?" In the IMS system, there is a mandatory field earmarked "Invoice Field Status". Unless this is filled, processing of the order does not go ahead. So, what Raju & Company did was to use two alphabets "H" (Home) or "S" (Super) in the Invoice Field Status to process the entry. The invoices, thus created were "hidden" from the view of those who ran the finance units. There were about 74,625 invoices generated in the IMS between April 2003 and December 2008. About 7561 invoices out of 74,625 had "S" marked in their invoice field status. Out of this, 6603 were also found on the company's Oracle Financials software system, to make it seem like these were actual sales. Entries into this system get reflected straight in the Profit and Loss Statement. The balance of 958 invoices remained in the invoice state, and therefore, within the IMS system-they were not keyed into the Oracle enterprise-ware. The total revenues shown against these 7561 fake invoices were Rs. 5117 crore. Of this, sales through the "reconciled" 6603 invoices were about Rs. 4746 crore. The CBI has also found that "sales were inflated every quarter and the average inflation in sales was about 18%. After generating fake invoices in IMS, a senior manager of the finance department (named Srisailam), entered the 6,603 fake invoices into Oracle Financials with the objective of inflating sales by Rs. 4746 crore. By reconciling the receipts of these invoices, the cash balances in the company's account were shown at Rs. 3983 crore. The CBI officers have concluded that "the scandal involved this system structure being bypassed by the abuse of an emergency 'Excel Porting System', which allows invoices to be generated directly in IMS … by porting the data into the IMS." This system was subverted by the creation of a user ID called "Super User" with "the power to hide/unhide the invoices generated in IMS." By logging in, as Super User, the accused were hiding some of the invoices that were generated through Excel Porting. Once an invoice is hidden the same will not be visible to the other divisions within the company but will only be visible to the company's finance division sales team. As a result, concerned business circles would not be aware of the invoices, which were also not dispatched to the customers. Investigation revealed that all the invoices that were hidden using the Super User ID in the IMS server were found to be false and fabricated. The face values of these fake invoices were shown as receivables in the books of accounts of Satyam, thereby dishonestly inflating the total revenues of the company.

Showing Fake and Underutilized Employees
To quote Bhasin [24], "One of the biggest sources of defalcation at Satyam was the inflation of the number of employees. Founder chairman of Satyam, Raju claimed that the company had 53,000 employees on its payroll. But according to investigators, the real number was around 43,000. The fictitious/ghost number of employees could be fabricated because payment to the remaining 13,000 employees was faked year-after-year: an operation that evidently involved the creation of bogus companies with a large number of employees." The money, in the form of salaries paid to ghost employees, came to around $4 million a month, which was diverted through front companies and through accounts belonging to one of Mr. Raju's brothers and his mother to buy thousands of acres of land. Making up ghost employees might sound complicated, but investigators said it was not that difficult: "Employees are just code numbers in your system; you can create any amount of them by creating bogus employee IDs with false address, time-sheets, opening salary accounts with banks, and collecting payments through an accomplice." Interestingly, the charge-sheet filed by the investigators is of the view that Satyam employees remained underutilized. For instance, the utilization level shown in the latest investor update by the company is about 74.88% for offshore employees. However, the actual utilization was 62.02%.This clearly shows that the bench strength was as high as 40% in the offshore category. Further, as a result of underutilization, the company was forced to pay salaries to associates without jobs on hand, which increased the burden on company's finances. Even in the onshore category, the bench strength was around 5% (of total staff).

Why Did Raju (Chairman) Need the Money?
Indeed, it started with Raju's love for land and that unquenchable thirst to own more  [20] reported, "The effort failed and in Jan. 2009 Raju confessed to irregularity on his own, and was arrested two days later. This was followed by the law-suits filed in the U.S. contesting Maytas deal." Four independent directors quit the Satyam board and SEBI ordered promoters to disclose pledged shares to stock exchanges. The trigger was obviously the failed attempt to merge Maytas with Satyam.

Lax Board of Directors
The Satyam Boardwas composed of "chairman-friendly" directors, who failed to question the management's strategy and use of leverage in recasting the company. Moreover, they were also extremely slow to act when it was already clear that the company was in financial distress. Here, Bhasin [25] observed, "The directors acted as mere rubber stamps and the promoters were always present to influence the decision. The glue that held the board members together was Mr. Ramalinga Raju (Chairman). Each of the board members were there on his personal invitation and that made them ineffective.
The Board ignored, or failed to act on, critical information related to financial wrong-doings before the company ultimately collapsed." It was only when Raju in the Dec.

announced a $1.6 billion bid for two Maytas companies (Maytas Infra and Maytas
Properties) and while the share market reacted very strongly against the bid and prices plunged by 55% on concerns about Satyam's CG, that some of the independent directors came into action by announcing their withdrawal from the Board, by than it was too late.
Satyam board's investment decision to invest 1.6 billion dollars to acquire a 100% stake in Maytas Properties and in 51% stake in Maytas Infrastructure (the two real estate firms promoted by Raju's sons) was in gross violation of the Companies Act 1956, under which no company is allowed, without shareholder's approval to acquire directly or indirectly any other corporate entity that is valued at over 60% of its paid-up capital.
"Yet, Satyam's directors went along with the decision, raising only technical and procedural questions about SEBI's guidelines and the valuation of the Maytas companies.
They did not even refer to the conflict of interest in buying companies in a completely unrelated business, floated by the chairman's relatives," remarked Bhasin [16]. Indeed, one of the independent directors, Krishna Palepu, praised the merits of real-estate investment on Satyam's part.

Unconvincing Role of Independent Directors
With regard to the role of the "independent" directors (IDs) at Satyam, we should understand: how "independent" they actually were? It was seen that all the non-executive   ning programs for Satyam employees on CG principles and their compliance, even if not expressly forbidden statutorily, will still place him as one having a vested interest in accepting the unethical policy of the management as a quid pro quo. As an "independent" director, he should not have accepted any consulting assignment from Satyam.
"Satyam scam is one more proof that the mere compliance of SEBI's rule of the minimum number of independent directors does not guarantee ethical practices. Corporate history of the past decade has more than clearly shown that independent directors have not served their purpose," stated Bhasin [24] [27].
Notwithstanding Raju's confession, the Satyam episode has brought into sharp focus the role and efficacy of "independent" directors. The SEBI requires the Indian publicly held companies to ensure that independent directors make up at least half of their board strength. The knowledge available to independent directors and even audit committee members was inherently limited to prevent willful withholding of crucial information. The reality was, at the end of the day, even as an audit committee member or as an independent director, I would have to rely on what the management was presenting to me, drawing upon his experience as an independent director and audit committee member. As Bhasin [13] pointed out, "It is the auditors' job to see if the numbers presented are accurate. That is what the directors should have been asking… Like the dog that did not bark in the Sherlock Holmes story, the matter was allowed to slide. Even if outside directors were unaware of the true state of Satyam's finances, some 'red' flags should have been obvious." The closely-held structure of many Indian companies suggests a need for improved transparency and accountability for independent directors. Apart from improving disclosure standards, re-auditing norms, and greater shareholder activism, there is also a need to counter corruption.

Tunneling Strategy Used by Satyam
As part of their "tunneling" strategy, the Satyam promoters had substantially reduced Furthermore, as the promoters held a very small percentage of equity (mere 2.18%) on December 2008, as shown in Table 5, the concern was that poor performance would result in a takeover bid, thereby exposing the gap. The aborted Maytas acquisition deal was the final, desperate effort to cover up the accounting fraud by bringing in some real assets into the business. When that failed, Raju confessed the fraud. Given the stake the Raju's held in Matyas, pursuing the deal would not have been terribly difficult from the perspective of the Raju family.
As pointed out by Shirur [28], "Unlike Enron, which sank due to agency problem, Satyam was brought to its knee due to tunneling. The company with a huge cash pile, with promoters still controlling it with a small per cent of shares (less than 3%), and trying to absorb a real-estate company in which they have a majority stake is a deadly combination pointing prima facie to tunneling." The reason why Ramalinga Raju claims that he did it was because every year he was fudging revenue figures and since expenditure figures could not be fudged so easily, the gap between "actual" profit and "book" profit got widened every year. In order to close this gap, he had to buy Maytas Infrastructure and Maytas Properties. In this way, "fictitious" profits could be absorbed through a "self-dealing" process. Bhasin [6] concludes, "The auditors, bankers, and SEBI, the market watchdog, were all blamed for their role in the accounting fraud." They have also been barred from associating with the securities markets in any manner for the next 14 years.

Gaps in Satyam's Earnings and Cash Flows
Through long and bitter past experience, some investors have developed a set of early warning signs of financial reporting fraud. Bhasin [30] described it as: "One of the strongest is the difference between income and cash flow. Because overstated revenues cannot be collected and understated expenses still must be paid, companies that misreport income often show a much stronger trend in earnings than they do in cash flow from operations." But now, we can see there is no real difference in the trends in Satyam's net income and its cash flow from operations during 2004 and 2005, as shown in  flows were far less than net income due to accounting manipulations. Indeed, Satyam fraud was a stunningly and very cleverly articulated comprehensive fraud, likely to be far more extensive than what happened at Enron," said Bhasin [31].The independent board members of Satyam, the institutional investor community, the SEBI, retail investors, and the external auditor-none of them, including professional investors with detailed information and models available to them, detected the malfeasance.  The SFIO Report [29] stated that "the statutory auditors instead of using an independent testing mechanism used Satyam's investigative tools and there by compromised on reporting standards." PwC did not check even 1% of the invoices; neither did they pay enough attention to verification of sundry debtors, which (according to Raju' s confession) was overstated by 23% (SFIO report says it was overstated by almost 50%).

Fake Audit and Dubious Role Played by Auditor's
The Statutory auditors also failed in discharging their duty when it came to independently verifying cash and bank balances, both current account and fixed deposits.
Hence, it was required that the auditors (PwC) independently checked with the banks on the existence of fixed deposits, but this was not done for as large as a sum of Rs.
5,040 crore. "The statutory auditors on whom the general public relied on for accurate information not only failed in their job but themselves played a part in perpetrating fraud by preparing a clean audit report for fudged, manipulated and cooked books," concluded Bhasin [24]. It is shocking to know that "PwC outsourced the audit function to some audit firm, Lovelock and Lewis, without the approval of Satyam." To be fair, there were probably thousands of Satyam cash accounts that had to be confirmed by the auditor, as the outsourcer has nearly 700 customers (including 185 Fortune 500 companies) in 65 countries. The audits for a company of that size would have been staggered, with millions of dollars of outstanding receivables pouring in to different locations at any given time. As Veena et al. [33] commented, "The Satyam case focuses on auditors' responsibilities related to obtaining and evaluating audit evidence, particularly as it relates to confirming cash and receivables. It also explores the quality control responsibilities related to audit procedures performed by foreign affiliates of a large international audit firm." One particularly troubling item concerned the $1.04 billion that Satyam claimed to have on its balance sheet in "non-interest-bearing" deposits. Bhasin [9] pointed out, "The large amount of cash should have been a 'red-flag' for the auditors that further verification and testing were necessary. While verifying bank balances, they relied wholly on the (forged) fixed deposit receipts and bank statements provided by the 'Chairman's office'. As to the external auditors, who are supposed to look out for investors, they seem to have been quite a trusting lot. "The forensic audit reveals differences running into hundreds of crores of Rupees. Between the fake and real statements, as captured by the computerized accounting systems. But for some strange reason, everyone, from the internal auditor to the statutory auditors, chose to place their faith in the 'Chairman's office' rather than the company's information systems, stated Bhasin [15]. Furthermore, it appears that the auditors did not independently verify with the banks in which Satyam claimed to have deposits. Unfortunately, the PwC audited the company for nearly 9 years and did not uncover the fraud, whereas Merrill Lynch discovered the fraud as part of its due diligence in merely 10 days. Missing these "red-flags" implied either that the auditors were grossly inept or in collusion with the company in committing the fraud.
When scams break out in the private sector auditors too end up on the firing line.
The CBI, which investigated the Satyam fraud case, also charged the two auditors with complicity in the commission of the fraud by consciously overlooking the accounting irregularities. On April 22, 2014 "The Institute of Chartered Accountants of India (ICAI)" [34] has imposed a life-time ban on four auditors (Mr. S. Gopalakrishna, Mr. Talluri Srinivas, Mr. V. Srinivasa and Mr. V.S. Prabhakara Rao) involved in the Satyam CA fraud. All of them had been found guilty of gross negligence in discharge of their duties by the Disciplinary Committee of ICAI and they were barred from practicing as a Chartered Accountant. A penalty of Rs. 5 lakh each was also levied on them. Strangely, Satyam's auditor, PwC, got away with a rap on its knuckles.

Abnormal Audit Fees Paid to PwC India Agent
A point has also been raised about the unjustified increase in audit fees. A reference to the figures of audit fee in comparison with total income over a period of time may be pertinent.

Questionable Role of the Audit Committee
As Bhasin [9] strongly observed, "Surprisingly, the failure to detect the Satyam fraud is 'unimaginable' because it involves violating basic audit procedures. Auditing cash is so basic that people do not think twice about accepting the number, never thinking to ask questions about it." Still, a basic question arises: "Where was the Audit Committee Moreover, Bhasin [20] observed that "the timely action on the information supplied bya whistleblower to the chairman and members of the AC (an e-mail dated Decem-ber18, 2008 by Jose Abraham), could serve as an SOS to the company, but, they chose to keep silent and did not report the matter to the shareholders or the regulatory authorities." The Board members on AC, who failed to perform their duties alertly be therefore tried out under the provisions of the Securities Contracts (Regulation) Act, 1956 (an unimaginable fine extendable to Rs. 25 crore but also including imprisonment for a term, which may extent to 10 years).

The Aftermath of Satyam Scandal
At its "peak" market-capitalization, Satyam was valued at Rs. 36

Investigation into the Satyam Case: Criminal& Civil Charges
The Indian government immediately started an investigation, while at the same time limiting its direct participation. According to Bhasin [36], "The government appointed

Conclusions
The Satyam scam was clearly a glaring example of "abuse" of CA, in which the account books were cooked up. The purpose was to inflate the share price of the company and sell the promoters holding at inflated price. As a result of this fraud, the share of the company fell drastically thus, wiping out Rs. 9376 crores of investors' wealth in just one single day. Moreover, Satyam investigators have uncovered "systemic" insider trading.
The ED claims to have found prima facie evidence against Raju and others of violating the Prevention of Money Laundering Act. Sources at the SFIO revealed to the Press that several institutional investors dumped shares in the firm on "large scale" up to two days before Ramalinga Raju confessed to "wildly" inflate the company's assets and profitability. Most of the sales seemed to have taken place after Satyam failed in the bid to acquire Maytas Infra and Maytas Properties. Even to a casual observer of the Satyam fiasco, the enormity of the scandal was a great eye-opener.
The CA scam committed by the founders of Satyam is a testament to the fact that the science of conduct is swayed in large by human greed, ambition, and hunger for power, money, fame and glory. Bhasin [17] lucidly pointed out that "the culture at Satyam The Satyam scam, involving the misuse of CA, has shattered the dreams of different categories of investors, shocked the government and regulators alike, and led to questioning the accounting practices of statutory auditors and CG norms in India. The accounting scandal at Satyam has raised several governance questions about the company's board and its auditors. The most perplexing question is: "Why did not the oversight mechanisms at Satyam uncover the fraud sooner?" One CG expert claims that a lax regulatory system in India bears at least some of the blame. Here, Bhasin [13] commented as: "CG in India was late on the scene, it is more politically motivated than legally based and regulatory laws and agencies are burdened with the complex, slowmoving legislative and judicial processes. The Satyam scam has exposed huge cracks in India's CG structure sand system of regulation through the SEBI, Ministry of Corporate Affairs and the SFIO. Unless the entire system is radically overhauled and made publicly accountable, corrupt corporate practices will recur, robbing wealth from the exchequer, public banks and shareholders. Thus, a governance disaster was predictable." Moreover, Satyam fraud has forced the government to re-write CG rules and tightened the norms for auditors and accountants. The Indian affiliate of PwC "routinely failed to follow the most basic audit procedures. The SEC and the PCAOB fined the affiliate, PwC India, $7.5 million: in what was described as the largest American penalty ever against a foreign accounting firm" [38]. According to Mr. Chopra [39], President of ICAI, "The Satyam scam was not an accounting or auditing failure, but one of CG. This apex body had found the two PwC auditors 'prima-facie' guilty of professional misconduct." The CBI, which investigated the Satyam fraud case, also charged the two auditors with complicity in the commission of the fraud by consciously overlooking the accounting irregularities. As Krishnan [40] pointed out, "Yet both Satyam's internal as well as statutory auditors did not bring it to anyone's notice. Well, the internal auditor hauled up by SEBI has frankly admitted that he did notice differences in the amounts billed to big clients, such as Citigroup and Agilent, when he scoured Satyam's computerized accounts. But when he flagged this with Satyam's finance team, he was fobbed off with the assurance that the accounts would be 'reconciled'. Later, he was 'assured' that the problem had been fixed."