...Ethics in Accounting By Pace University – New York Accounting for Decision Making, MBA 640 Fall 2011 Required Research Paper Page 1 of 11 Table of Contents Number Content Page Number 1 Introduction 3 2 Ethics in Accounting 4 3 Enron Scandal 6 4 Satyam Scandal 8 5 Conclusion 10 6 References 11 Page 2 of 11 Introduction • What is “Ethics”? Ethics, also known as moral philosophy, is a branch of philosophy that addresses questions about morality—that is, concepts such as good and evil, right and wrong, virtue and vice, justice and crime, etc. Source: http://en.wikipedia.org/wiki/Ethics • What is “Accounting”? Accounting is basically maintaining and providing records of transfer of funds for an individual or business. All the data collected from these records are then summarized in form of reports and statements, which are used by outside parties and the company itself for various uses and analysis. Source: http://www.investopedia.com/terms/a/accounting.asp#axzz1fbCBL2q0 Page 3 of 11 Ethics in Accounting With many scandals and scams coming out regarding the unethical behavior of firms in terms of Business and accounting, higher authorities in governments across the globe are worried. These scams are disturbing and damaging the economy at large. When the economy is already sliding down, governments have started taking extra care and strict rules are being applied to control the damage...
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...SUBMITTED BY: Abhijith Rajan AUD 2351 MBA (GENERAL) ABSTRACT From Satyam, we can see that corporate book keeping misrepresentation is a noteworthy issue that is raising both in its recurrence and seriousness. Exploration confirmation has demonstrated that these developing number of fakes have made undermined the trustworthiness of monetary reports, added to generous financial misfortunes, and disintegrated speculators' certainty with respect to the handiness and dependability of money related articulations. The expanding rate of these sort of law violations need to get hardened punishments, excellent disciplines, and powerful requirement of law with the right soul. An endeavor is made to inspect and investigate inside and out the Satyam Computer's "inventive bookkeeping" embarrassment, which conveyed to spotlight the significance of "morals and corporate administration" (CG). The extortion submitted by the authors of Satyam in 2009, is a demonstration of the way that "the art of behavior is influenced in huge by human eagerness, aspiration, and crave influence, cash, acclaim and wonderfulness". Dissimilar to Enron, which sank because of "organization" issue, Satyam was conveyed to its knee because of "burrowing" impact. The Satyam embarrassment highlights the significance of securities laws and CG in "developing" markets. Without a doubt, Satyam misrepresentation "prodded the administration of India to fix the CG standards to anticipate repeat of comparative cheats in future"...
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...VANITA YADAV C.V. BAXI CORPORATE GOVERNANCE FAILURE AT SATYAM “Why do you want to quit Satyam,”1 the panel member asked the 30-year-old employee being interviewed. Satyam Computer Services Ltd (“Satyam”) was India’s fourth-largest computer services company; however, many employees had left and applied for new jobs after news of a US$1.4 billion corporate fraud at Satyam became public in December 2008. 2 Satyam’s governance failure had severely shaken its stakeholders and the global business community, and the business press worldwide referred to Satyam as “India’s Enron”.3 Satyam was listed on the New York Stock Exchange (“NYSE”) in 2001 and on Euronext Amsterdam in 2008. 4 It boasted a large number of clients, including many Fortune 500 companies.5 The founder of Satyam Computer Services, B. Ramalinga Raju (“Raju”), was a highly regarded entrepreneur and an eminent fixture at prestigious corporate events in India.6 In 2007, he was honoured with the Ernst & Young Entrepreneur of the Year award, yet a mere two years later, on 7 January 2009, Raju made the calamitous confession that he had falsified accounts on a grand scale over a long period of time. His shocking announcement sparked a big debate over whether India possessed adequate guidelines for corporate governance. 7 How did Raju commit a fraud of such magnitude? How could a successful company, twice awarded the Golden Peacock award for corporate governance excellence collapse in such a manner? 8 Where did the internal...
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...recommendations for an improved outcome, using the same resources. Support your discussion with evidence from reputable resources, as well as content and concepts from the text. ANSWER I was overwhelmed while doing the internet news search to find an example of business that has abused its power. The search came up with so many examples that it made me realize that probably all the business abuse their position in some or the other way. There were many example to choose from but I chose “Corporate accounting scandal at Satyam “, which is also infamously called as India’s Enron. The reason why I selected this particular company is that I had my cousin brothers and sisters working for this company and this scandal affected our families in a big way. The background Scandals are like an iceberg, they represent the only visible catastrophic failure. Saytam Computers was founded By Mr. Ramalinga Raju who hailed form a traditional agriculture family of Andhra Pradesh, India in 1987 with a just 20 employees and converted the company got Public in 1992.The chairman of the company was the founder himself, Mr. Ramalinga Raju (Alias Raju) until January 7, 2009 when he resigned from the board of directors after admitting to corporate fraud. (Author HT correspondent, April, 9, 2015). The company offered consulting and information technology services to the various business sectors. The company had services in 66 countries and 53000 employees in 6 continents. It was listed on Bombay stock exchange...
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...Satyam scam- Accounting Fraud (MBA III B) Submitted to:- Submitted by:- Dr. Urvashi Ghai Varun Sachdeva(124) Khyati Mathur(123) INDEX S.No. | Topics | Page No. | 1 | Satyam Scam- Introduction | 3 | 2 | Factors responsible for Fraud | 6 | 3 | Lessons learnt from Scam | 8 | 4 | Guide to Predetermine Manipulations | 9 | 5 | References | 12 | Introduction to the Scandal Mr. Ramalinga Raju and the Satyam Scandal On January 7, 2009, Mr. Raju disclosed in a letter to Satyam Computers Limited Board of Di- rectors that “he had been manipulating the company’s accounting numbers for years”. Mr. Raju claimed that he overstated assets on Satyam’s balance sheet by $1.47 billion. Nearly $1.04 billion in bank loans and cash that the company claimed to own was non-existent. Satyam also underreported liabilities on its balance sheet. Satyam overstated income nearly every quarter over the course of several years in order to meet analyst expectations. For example, the results announced on October 17, 2009 overstated quarterly revenues by 75 percent and profits by 97 percent. Mr. Raju and the company’s global head of internal audit used a number of different techniques to perpetrate the fraud. “Using his personal computer, Mr. Raju created numerous bank statements to advance the fraud. Mr. Raju falsified the bank accounts to inflate the balance sheet with balances that did not exist. He inflated the income statement by claiming interest income from the fake bank accounts...
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...Sathyamoorthy Vasanth Raj Sneha Jaiswal Navin Prakash Group C9 Satyam Scandal The irony of the meaning of Satyam has been highlighted by many media reports. Satyam is derived from the Sanskrit word for truth and honesty. In January 7, 2009, will go down as a black day in corporate India for this was the day India was hit by its first major market/corporate scandal leading to the collapse of the stock of a major Indian IT corporate house. Ramalinga Raju, founder and Chairman of Satyam Computer Services Ltd, India’s 4th largest IT services company, admitted to fraud and inflating the revenue and costs and resigned from the company and the board. Raju admitted that he falsified the account books at Satyam. The $1.04 billion listed in assets is non-existent according to Raju reports The New York Times (12/01/2009). Satyam was listed on the Bombay Stock Exchange, The New York Stock Exchange (NYSE) and Euronext. NYSE stopped trading Satyam’s stocks after news spread. Later, Satyam removed from the Indian stock exchange. Analysts in India have termed the Satyam scandal as India's own Enron scandal. The following is a list of factors that contributed to the fraud: • Greed • Ambitious corporate growth • Deceptive reporting practices—lack of transparency • Excessive interest in maintaining stock prices • Executive incentives • Stock market expectations • Nature of accounting rules AFTERMATH OF SATYAM SCANDAL Satyam's shares fell to 11.50 rupees on 10 January 2009, their...
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...am Scam and Ethics Running head: ETHICAL ISSUES IN SATYAM SCAM 1 A Study of Ethical Issues in Satyam Scam Haresh M Patel (Roll No.2234) B.K.School of Business Management (Evening Programme) ?Ethical Issues in Satyam Scam Abstract “Reputation is an idle and most false imposition: oft got without merit, and lost without deserving”. Failed institutions, including Lehman Brothers, Enron and Satyam, would stand a testimony to this affray in a post-mortem analysis. This paper discusses corporate ethical issues involved in ‘Satyam Scam’ from a compliance perspective. It makes a distinction between legal and ethical compliance mechanisms and also shows that the legal compliance mechanism has clearly proven to be inadequate as it lacks the moral firepower to restore confidence and the ability to build trust. The concepts of freedom of indifference and freedom for excellence provide a theoretical basis for explaining why legal compliance mechanisms are insufficient in 2 dealing with fraudulent practices and may not be addressing the real and fundamental issues that inspire ethical behavior. The focus of the virtues in governance is to establish a series of practical responses which depend on the consistent application of core values and principles as well as commitment to ethical business practice. In my opinion, No one makes it to the top ranks of corporate management without a healthy amount of self-assurance. Confidence underlies decisive, strong leadership, but does overconfidence...
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...What happened to Satyam? Satyam Computers, the fourth largest IT industry of India, The member of Nifty 50, BSE Sensex, winner of golden peacock award for best corporate governance, and many more laurels that it has in its kitty did not stop it from drowning like a rock in its dirty waters. Ramalinga Raju of Satyam computers, confessed in a four page letter, stating that the accounting books of Satyam had been hugely inflated and that the company did not have that much of money as it was showing. In layman's terms, the company had been from that time lying about the amount of money that they had. Imagine a person telling you he has Rs 10000 but in reality has only Rs 50. Only that the proportion was so high that it took many down with it. This is done in business so that the reputation of the company maintains in business circles, the company keeps getting clients because of its strong liquidity position and investors keep pumping money into the company, to earn more money. Only that all of this was based on pure lies. Ramalinga Raju claims that he did not take any personal advatange and there was no money laundering. A few days back Ramalinga Raju, decided to buy his sons contruction company MAytas infras for around 1 Billion $ so as to plug the hole between the actual company finances and the projected finances. We can only imagine in his mind. The best guess is, he would have deffered payment to Maytas, and then would have shown the gap as the money involved in paying Maytas...
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...Running head: ETHICAL ISSUES IN SATYAM SCAM 1 A Study of Ethical Issues in Satyam Scam Haresh M Patel (Roll No.2234) B.K.School of Business Management (Evening Programme) Ethical Issues in Satyam Scam Abstract “Reputation is an idle and most false imposition: oft got without merit, and lost without deserving”. Failed institutions, including Lehman Brothers, Enron and Satyam, would stand a testimony to this affray in a post-mortem analysis. This paper discusses corporate ethical issues involved in ‘Satyam Scam’ from a compliance perspective. It makes a distinction between legal and ethical compliance mechanisms and also shows that the legal compliance mechanism has clearly proven to be inadequate as it lacks the moral firepower to restore confidence and the ability to build trust. The concepts of freedom of indifference and freedom for excellence provide a theoretical basis for explaining why legal compliance mechanisms are insufficient in 2 dealing with fraudulent practices and may not be addressing the real and fundamental issues that inspire ethical behavior. The focus of the virtues in governance is to establish a series of practical responses which depend on the consistent application of core values and principles as well as commitment to ethical business practice. In my opinion, No one makes it to the top ranks of corporate management without a healthy amount of self-assurance. Confidence underlies decisive, strong leadership, but does overconfidence lead...
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...A special CBI court on Thursday sentenced B Ramalinga Raju, his two brothers and seven others to seven years in prison in the Satyam fraud case. The court also imposed a fine of Rs 5 crore on Ramalinga Raju, the Satyam Computer Services Ltd's founder and former chairman, and his brother B Rama Raju and Rs 20-25 lakh each on the remaining accused. HT presents a lowdown of the country's biggest-ever corporate accounting scandal . What is the Satyam scam about? It is about corporate governance and fraudulent auditing practices allegedly in connivance with auditors and chartered accountants. The company misrepresented its accounts both to its board, stock exchanges, regulators, investors and all other stakeholders. Is this an accounting fraud, a market manipulation/fraud or both? It is a fraud, which misled the market and other stakeholders by lying about the company’s financial health. Even basic facts such as revenues, operating profits, interest liabilities and cash balances were grossly inflated to show the company in good health. Who is to blame here? The promoters? The promoters are primary culprits, although it is almost impossible to misrepresent such facts without the connivance of the auditors and some executive board members. Independent directors, it seems, were kept in the dark about the actual books of accounts. What about the auditors? The role of external third party auditors, who were tasked to ensure that no financial bungling is undertaken to carry...
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...History Satyam Computer services Limited an Information Technology Company was founded in 1987 by Ramalinga Raju. The company is based in Hyderabad, India and was the fourth largest software exporter in India until January 2009. As one of the largest software company, Satyam traded in the Bombay Stock Exchange, the national Stock Exchange and New York Exchange. Satyam grew rapidly with customers stretching over 66 countries and was ranked at 185th on the Fortune 500 companies list. In 2008, Satyam received the the Global Peacock Award for global excellence in corporate accountability. Satyam continued to grow even when stock markets around the world were collapsing. In December 2008, Mr. Raju wanted to merge Matyas a real-estate company with Satyam. Matyas a company owned by his family was a complete diversity from the software company. Raju and his family owned a lot more shares in Matyas than they did in Satyam. The merge caused investors to question Mr. Raju’s intentions. The stockholders objected to the merge and the idea was aborted. However, the damage had already been done. The investors had lost faith and Satyam’s stocks plunged to an unbelievable low. Ironically, the word Satyam means Truth in Sanskrit and as the world watched the truth about Raju started to unravel. Fraud is Uncovered In October of 2008, World Bank fired Satyam and restrictions were put in place against the company from bidding for eight years. World Bank alleged that that Satyam had placed spy...
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...investments, as well as deter fraudulent behavior. The complexity in the modern business world, and its need for transparency can be evidenced through an examination of 3 levels: company-wide, industry, and globally. Looking on a company-wide basis, a lack of transparency on the part of individual organizations can lead to fraud and unethical practices, whereas a demonstration of strong transparency reduces the impact and likelihood of scandals. Enron, a leading energy and natural gas provider was accused of an accounting fraud in 2001. One of the primary reasons that led to this scandal was Enron’s usage of special purpose entities (SPEs) to cover up debt that the company was taking upon. By hiding additional debt, the company looked favourable as an investment because of low risk. Additionally, creditors were impressed with the low debt to equity ratio and were open to the idea of lending Enron money in case the need arose. SPEs were also used to cover up any losses that the company was experiencing. As a result, the parent company, Enron, consistently reported...
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...Satyam Computers Limited-A case of corporate fraud. Overview: Satyam Computer Services (an IT company) is considered India’s Enron. The company CEO Mr. Raju was the main person involved. In the end, he admitted to faking company profit for numerous years and was arrested for 1.47 billion dollars in fraud. Fraudulent acts: Mr. Raju worked with the internal auditors to come up with ways to create non-existent profits and eliminate debt. For instance, he had fake bank accounts on paper in order to report fake interest income. In addition, internal auditors created fake customer identities to increase company revenue. According to Raju, the fraudulent activities started out only creating a marginal gap between actual and book profit. However, things got out of hand quickly. Cover-ups after cover-ups made the gap wider and wider. External parties involved: Satyam’s external auditors, PwC, were also under high scrutiny and criticism after the fall of Satyam. They were Satyam’s auditors for 9 years and signed off on Satyam’s financial statements annually. Under Indian law, if PwC signed off the financial statements, they are responsible for the numbers. Authorities blamed PwC because they failed to notice obvious red flags such as Satyam having a large no-interest bearing account. Reasonable companies would have invested the money in interest bearing accounts or distributed dividends to shareholders. Red flags raised: Merrill Lynch was appointed by Satyam to...
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...Determine the most important five (5) skills that a forensic accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations. A study conducted by two professors from Rider College interviewed over 150 lawyers, Certified Public Accountants (CPAs) and accounting educators. The study identified sixteen skills needed by forensic accountants. According to the study, the five most important skills are analytical skills, basic accounting skills, problem solving skills, data analysis skills and interviewing skills (McMullen & Sanchez, 2010). Forensic accountants need analytical skills because as they review financial reports and other source documents, they need to analyze the validity of each transaction and determine if the company recorded the transaction fairly. The forensic accountant needs the ability to analyze where the data came from and whether the data accurately reflects the numbers posted in the financial reports (McIntosh, n.d.). With an in house forensic accountant, this will ensure the company’s financial state is accurately reflected while an independent forensic accountant can verify the accuracy of the reports, both of which help investors determine if the company is worth investing in. “Accounting is widely regarded as the language of business” (McMullen and Sanchez, 2010, pg.1). As such, the need for basic accounting skills is self-evident...
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...The below are the requirements for term paper. 1)Title 2)Object 3)Review(2 articles) 4)Analysis 5)conclusion 6)Source(References) http://www.businessweek.com/blogs/globespotting/archives/2009/01/satyam_scandal.html The terror attacks on Mumbai were just a tremor for the country’s tech industry compared to the shocks coming from the Satyam scandal. Earlier today, Ramalinga Raju, Satyam’s founder and longtime chairman, admitted in a letter to the board that he had been cooking the books for years to make up for revenue and profit shortfalls. Read the details in this report by my BW colleague, Manjeet Kripalani. In his letter, Raju wrote that the cover-up finally got the best of him: “It was like riding a tiger, not knowing how to get off without being eaten.” This admission will have a crippling impact on Satyam. Its chances of getting new business are nil. Don’t expect its current customers to abandon the company overnight. That’s not easy in a tech services business where the operations of the client and service provider are so interwoven. On the other hand, it’s possible that the company may collapse financially, in which case clients will have no choice but to flee. Which brings us to a bigger shock: This betrayal of trust could have a major impact on the entire Indian tech services industry. The industry has spent 20 years building up credibility with Western clients, but this disaster will make many US and European clients rethink their reliance on Indian outsourcing...
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