Essay on Satyam Scandal: Ramalinga Raju's Fraudulent Misrepresentation of Company Funds

Paper Type:  Essay
Pages:  4
Wordcount:  865 Words
Date:  2023-08-08

Satyam Computer Services Limited is a worldwide IT service and consulting organization based in India. The company offers a broad range of solutions, such as executing the customers' IT solutions and strategic consultation. The company is also specialized in assisting clients in re-inventing and re-engineering their businesses to be more competitive in the dynamic market (Bhasin 31).Satyam scandal involved Satyam Computer Services, where its chairperson and founder Ramalinga Raju announced of the company’s profit grossly inflation over the years, about 94 percent of its assets amounting to $1billion was false. This sudden disclosure to the 80% plummeting of the organization's shares, destabilization of the broader equity market in India, The Indian Rupee lost its global value and the fall of the stock in Bombay by 7.3%.

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The company's chairman Ramalinga Raju conducted ethical malpractice, the misconducts he admitted. As from the Serious Fraud Investigation Office (SFIO), the senior management was involved in the fraud that includes the G Ramakrishna, the ex-vice-president (finance), Vadlamani who is an ex-CFO and its founders. The top management conspired in increasing the profit and revenue books artificially (Dewangan&Ikhar 33). Ramalinga Raju conducted an unethical business practice to gain more profit due to greed. The chairman conspiring with his top management artificially created fake accounting books, invoices, and salaries, to portray his organization was in a better financial position and attracted more investors. The fraud came to limelight when Raju wrote a confession letter to the Securities and Exchange Board of India, where he admitted of financial irregularities and fraudulent practices in his organization. Raju and other perpetrators were found guilty of conspiring in the company's revenue inflation, counterfeiting the income tax returns and accounts, and faking salaries and invoices. The Hyderabad court found them guilty and sends them for a seven-year jail term. A few facts known about the scandal is that the chairman his relative used the money produced to buy land under relative names.

Raju and his executive practices were not as ethical as what is expected from any company’s leader. It is seen that the fraud was aggravated due to ambition, power, glory, fame, and human greed. The company should come up with new privacy policies. The company can improve in its IT security to audit every employer in the company and vet of any malicious message to curb any future fraud. The chief financial officers should be appointed as per their background, experience, and qualification. The company should adopt existing financial reporting standards. Still, the company can start five years rotations of its auditors so that they will not get used and lead to malpractices (Khatoon, Reddy, and Deb 40).

In every business, there is a need to safeguard and recover the disclosers from corporations as one way of averting accounting deceit. It is for this very reason that the Sarbanes-Oxley was established, so every company must comply with its guidelines. Consequently, every company needs to have a strategic control system that opts to diminish or condense any prospect of non-conformity and raise the alarm on any rupture, fiasco, or weaknesses. Referring to the SOX provisions, especially sections 302, 401, 404, 409, and 802, every company should strive to grasp guidelines that will protect them as well as their investors. The very first strategy is to form an internal compliance commission. In order to build an accurate culture of acquiescence, a set of the liberal-minded team is necessary to oversee and plan on how the company will deal with general risk management. The team would also design and strategize on how the compliance program will run as well as the necessary steps required to build and generate the ethical elements of the company. Additionally, the committee members should be, among other things, be devoted to the SOX guidelines and be proficient in driving the company on an extensive viewpoint, such as in risk identification and offering solutions. In its course, the commission needs to set the program's primary intents and deliver training and assessment resources as desired.


The company can also instill internal controls to curb fraud. The company can have internal functional controls that can detect and prevent frauds, such as giving duties such as auditing of the employees, the physical control, such as barriers that will separate employees from records of sand cash. There are several steps the accounting professional has adapted to prevents such malpractices. The accounting professional has opted for the organization to include the international financial reporting standards. The new CFOs are employed based on their background, experience, and qualifications. The auditors are to be rotated occasionally to prevents them from being familiar with the organization that may result in mismanagement and fraudulent. There should be a significant number of independent directors in the auditing committee.

Works Cited

Bhasin, Madan Lal. "Revisiting the Satyam Accounting Scam: A Case Study." International Journal of Management and Social Sciences Research 5 (2016): 31-46.

Dewangan, Shweta, and Mahendra Kumar Ikhar. "Role of Ethics and Governance In The Accounting Practices In Present Indian Businesses With Special Reference To Satyam Scandal." Indian Journal of Scientific Research (2018): 33-38.

Khatoon, Sofia Khusboo, Manaswini Reddy, and Soumma Deb. "How CSr Can Stop Company Frauds." IPE Journal of Management 9.2 (2019): 40-49.

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Essay on Satyam Scandal: Ramalinga Raju's Fraudulent Misrepresentation of Company Funds. (2023, Aug 08). Retrieved from

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