Corporate Accounting Fraud: A Case Study of Satyam Computers Limited


From Enron, WorldCom and Satyam,it appears that corporate accounting fraud is a major problem that is increasing both in its frequency and severity. Research evidence has shown that growing number of frauds have undermined the integrity of financial reports, contributed to substantial economic losses, and eroded investors’ confidence regarding the usefulness and reliability of financial statements. The increasing rate of white-collar crimes demands stiff penalties, exemplary punishments, and effective enforcement of law with the right spirit.An attempt is made to examine and analyze in-depth the Satyam Computer’s “creative-accounting” scandal, whichbrought to limelight the importance of “ethics and corporate governance” (CG). The fraud committed by the founders of Satyam in 2009, is a testament to the fact “the science of conduct is swayed in large by human greed, ambition, and hunger for power, money, fame and glory”. Unlike Enron, which sank due to“agency”problem, Satyam was brought to its knee due to ‘tunneling’ effect. The Satyam scandal highlights the importance of securities laws and CG in ‘emerging’ markets. Indeed, Satyam fraud “spurred the government of Indiato tighten the CG norms to prevent recurrence of similar frauds in future”.Thus, major financial reporting frauds need to be studied for“lessons-learned”and“strategies-to-follow”to reduce the incidents of such frauds in the future.

Share and Cite:

M. Lal Bhasin, "Corporate Accounting Fraud: A Case Study of Satyam Computers Limited," Open Journal of Accounting, Vol. 2 No. 2, 2013, pp. 26-38. doi: 10.4236/ojacct.2013.22006.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] ACFE, “Report to the Nation on Occupational Fraud and Abuse,” The Association of Certified Fraud Examiners, 2010.
[2] COSO, “Fraudulent Financial Reporting: 1987-2007,” Committee of Sponsoring Organizations of the Treadway Commission, 2010.
[3] KPMG Fraud Survey 2009, 2003, 1998, 1994.
[4] Deloitte Forensic Center, “Fraud, Bribery and Corruption Practices Survey,” 2011.
[5] National Fraud Authority, “Annual Fraud Indicator,” 2012.
[6] W. K. Black, “Epidemics of Control Fraud Lead to Recurrent, Intensifying Bubbles and Crises,” University of Missouri, Kansas City, 2010.
[7] Ernst & Young, “Detecting Financial Statement Fraud: What Every Manager Needs to Know,” E & Y LLP, London, 2009, pp. 1-8.
[8] A. R. Reuber and E. Fischer, “Organizations Behaving Badly: When Are Discreditable Actions Likely to Damage Organizational Reputation?” Journal of Business Ethics, Vol. 93, No. 1, 2009, pp. 39-50. doi:10.1007/s10551-009-0180-3
[9] D. L. Crumbley, L. E. Heitger and G. S. Smith, “Forensic and Investigative Accounting Chicago: CCH Incorporated,” 2003.
[10] C. E. Crutchley, M. R. H. Jensen and Marshall, “Climate for Scandal: Corporate Environments that Contribute to Accounting Fraud,” The Financial Review, Vol. 42, No. 1, 2007, pp. 53-73.
[11] R. Jeffords, “How Useful Are the Treadway Risk Factors?” Internal Auditor, Vol. 49, No. 3, 1999, pp. 12-30.
[12] E. R. Smith, “A Positive Approach to Dealing with Embezzlement,” The White Paper, August/September 1995 pp. 17-18.
[13] D. E. Ziegenfuss, “State and Local Government Fraud Survey for 1995,” Managerial Auditing Journal, Vol. 11, No. 9, 1996, pp. 50-55. doi:10.1108/02686909610150395
[14] S. Haugen and J. R. Selin, “Identifying and Controlling Computer Crime and Employee Fraud,” Industrial Management & Data Systems, Vol. 99, No. 8, 1999, pp. 340-344. doi:10.1108/02635579910262544
[15] Sharma, S. and Brahma, “A Role of Insider in Banking Fraud,” 2000.
[16] Harris and William, “The Two Faces of the Transgender Fraudster Who Made Thousands of Pounds in Scams Posing as Both Sexes,” 2004.
[17] J. L. Beirstaker, R. G. Brody and C. Pacini, “Accountants’ Perceptions Regarding Fraud Detection and Prevention Methods,” Managerial Auditing Journal, Vol. 21. No. 5, 2006, pp. 520-535. doi:10.1108/02686900610667283
[18] R. Willison, “Understanding the Offender/Environment Dynamic for Computer Crimes,” Information Technology & People, Vol. 19, No. 2, 2006, pp. 170-186. doi:10.1108/09593840610673810
[19] F. Choo and K. Tan, “An American Dream Theory of Corporate Executive Fraud,” Accounting Forum, Vol. 31, No. 2, 2007, pp. 203-215. doi:10.1016/j.accfor.2006.12.004
[20] Schrand and Zechman, “Executive Overconfidence and the Slippery Road to Fraud,” 2007.
[21] M. L. Bhasin, “Corporate Governance and Role of the Forensic Accountant,” The Chartered Secretary Journal, Vol. 38, No. 10, 2008, pp. 1361-1368.
[22] S. Chen, “The Role of Ethical Leadership Versus Institutional Constraints: A Simulation Study of Financial Misreporting by CEOs,” Journal of Business Ethics, Vol. 93, No. 1, 2010, pp. 33-52. doi:10.1007/s10551-010-0625-8
[23] M. Cecchini, H. Aytug, G. J. Koehler and P. Pathak, “Detecting Management Fraud in Public Companies,” Management Science, Vol. 56, No. 7, 2010, pp. 1146-1160. doi:10.1287/mnsc.1100.1174
[24] E. Basilico, H. Grove and L. Patelli, “Asia’s Enron: Satyam,” Journal of Forensic & Investigative Accounting, Vol. 4. No. 2, 2012, pp. 142-160.
[25] T. Ahmad, T. Malawat, Y. Kochar and A. Roy, “Satyam Scam in the Contemporary Corporate World: A Case Study in Indian Perspective,” IUP Journal, 2010, pp. 1-48.
[26] S. Agrawal and R. Sharma, “Beat This: Satyam Won Awards for Corporate Governance, Internal Audit,” VCCircle, 2009.
[27] S. Ramachadran, “Raju Brings Down Satyam, Shakes India,” Asia Times Online Ltd., 2009.
[28] M. Damodaran, “Listed Firms to Get New Conduct Code,” Financial Chronicle, 2009.
[29] R. M. Bowen, A. C. Call and S. Rajgopal, “Whistle-Blowing: Target Firm Characteristics and Economic Consequences,” The Accounting Review, Vol. 85, No. 4, 2010, pp. 1239-1271. doi:10.2308/accr.2010.85.4.1239
[30] S. Shirur, “Tunneling vs. Agency Effect: A Case Study of Enron and Satyam,” Vikalpa, Vol. 36, No. 3, 2011, pp. 9-20.
[31] H. Timmons and B. Wassener, “Satyam Chief Admits Huge Fraud,” New York Times, 8 January 2009.
[32] S. S. Dagar, “How Satyam Was Sold the Untold Story: How the IT Services Major Was Rescued against all Odds. Business Today Reconstructs the Events of the 14 Crucial Weeks that Led up to the Sale,” Business Today, 2009, pp. 25-42.
[33] ICAI, “ICIA Finds ex Satyam CFO, Price Waterhouse Auditors Guilty,” Outlook, 2009.
[34] R. Chakrabarti, W. Megginson and P. K. Yadav, “Corporate Governance in India,” Journal of Applied Corporate Finance, Vol. 20, No. 1, 2008, pp. 59-78. doi:10.1111/j.1745-6622.2008.00169.x
[35] B. Behan, “Governance Lessons from India’s Satyam,” Business Week, 16 January 2009.
[36] Z. Rezaee and B. L. Kedia, “Role of Corporate Governance Participants in Preventing and Detecting Financial Statement Fraud,” Journal of Forensic & Investigative Accounting, Vol. 4, No. 2, 2012, pp. 176-205.
[37] AICPA, “SAP-99: Consideration of Fraud in a Financial Statement Audit. Auditing Standard Board,” 2002.
[38] F. Norris, “Indian Accounting Firm Is Fined $7.5 Million over Fraud at Satyam,” The New York Times, 5 April 2011.

Copyright © 2023 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.