Creative Accounting Practices at Satyam Computers Limited: A Case Study of India’s Enron
Keywords:Accounting scandal, accounting and auditing standards, Creative accounting practices.
Satyam Computers were once the crown jewel of Indian IT industry, however, the debacle of Satyam raised a debate about the role of CEO in driving a company to the heights of success and its relation with the board members and core committees. The scam brought to the light the role of corporate governance (CG) in shaping the protocols related to the working of audit committees and duties of board members. The Satyam scam was a jolt to the market, especially to Satyam stockholders. This paper attempts an in-depth analysis of India’s Enron, Satyam Computer’s “creative-accounting” scandal. In public companies, this type of ‘creative’ accounting leading to fraud and investigations are, therefore, launched by the various governmental oversight agencies. The accounting fraud committed by the founders of Satyam in 2009 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.” Scandals have proved that “there is an urgent need for good conduct based on strong corporate governance, ethics and accounting & auditing standards.” The Satyam scandal highlights the importance of securities laws and CG in emerging markets. Indeed, Satyam fraud “spurred the government of India to 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. The increasing rate of white-collar crimes “demands stiff penalties, exemplary punishments, and effective enforcement of law with the right spirit.”
ACFE (2010), “Report to the Nation on Occupational fraud and abuse,” The Association of Certified Fraud Examiners, available at
American Institute of Certified Public Accountants (2002), “SAP-99: Consideration of Fraud in a Financial Statement Audit,” Auditing Standard Board, AICPA, available at http://www.aicpa.org/info/sarbanes_oxley_summary.html.
Agrawal, S. and Sharma, R. (2009), “Beat this: Satyam won awards for corporate governance, internal audit.” VCCircle. Available at www.vccircle.com/news.
Ahmad, T., Malawat, T., Kochar, Y. and Roy, A. (2010), “Satyam Scam in the Contemporary corporate world: A case study in Indian Perspective,” IUP Journal. Available at SSRN,1-48.
Behan, B. (2009), “Governance lessons from India’s Satyam,” Business Week, 16 January.
Basilico, E., Grove, H, and Patelli, L. (2012), “Asia’s Enron: Satyam (Sanskrit word for truth),” Journal of Forensic & Investigative Accounting, 4(2), 142-160.
Beirstaker, J.L., Brody, R.G. and Pacini, C. (2005) “Accountants’ perceptions regarding fraud detection and prevention methods”, Managerial Auditing Journal, 21(5), 520-535.
Bhasin, M.L. (2008), “Corporate Governance and Role of the Forensic Accountant, The Chartered Secretary Journal, Vol. 38(10), October, 1361-1368.
Bhasin, M.L. (2011),Corporate Governance Disclosure Practices: The Portrait of a Developing Country, International Review of Business Research Papers, 7(1), January, 393-419.
Bhasin, M.L. (2013), Corporate Accounting Scandal at Satyam: A Case Study of India’s Enron, European Journal of Business and Social Sciences, 1(12), March, 25-47.
Bhasin, M.L. (2013a), Corporate Accounting Fraud: A Case Study of Satyam Computer Limited, Open Journal of Accounting, April, 2(2), 26-38.
Bhasin, M.L. (2013b), Corporate Governance and Role of the Forensic Accountants: An Exploratory Study of an Asian Country, International Journal of Contemporary Business Studies, 4(7), July, 38-59.
Bhasin, M.L. (2015), Menace of Frauds in Banking Industry: Experience of a Developing Country, Australian Journal of Business and Management Research, 4(12), April, 21-33.
Bhasin, M.L. (2015a), Creative Accounting Practices in the Indian Corporate Sector: An Empirical Study, International Journal of Management Science and Business Research, Volume 4, Issue 10, October 2015, E-ISSN 2226-8235 published by QS publishers, USA, pp. 35-52 (USA).
Bhasin, M.L. (2016), Contribution of Forensic Accounting to Corporate Governance: An Exploratory Study of an Asian Country, International Business Management Journal, 10(4), 479-492.
Bhasin, M.L. (2016a), Survey of Creative Accounting Practices: An Empirical Study, Wulfenia Journal KLAGENFURT, 23(1), January, 143-162,
Bologna, G.J. and Lindquist (1996), “Fraud Auditing and Forensic Accounting: New Tools and Techniques,” Wiley & Sons, New Jersey.
Bowen, R.M., Call, A.C and Rajgopal, S. (2010), “Whistle-blowing: target firm characteristics and economic consequences,” The Accounting Review, 85(4)1239-1271.
Blakely, R. (2009). “Investors raise questions over PWC Satyam audit,” Times Online.
Calderon, T. G., and B. P. Green. (1994). “Signaling Fraud by Using Analytical Procedures,” Ohio CPA Journal, April, 27-38.
Cecchini, M., Aytug, H., Koehler, G.J. and Pathak, P. (2010), “Detecting management fraud in public companies,” Management Science, 56(7) July, 1146-1160.
Crutchley, C.E., Jensen, M.R.H., and Marshall (2007), “Climate for scandal: corporate environments that contribute to accounting fraud,” The Financial Review, 42, The Eastern Finance Association, pp.53-73.
Chen, S. (2010) “The role of ethical leadership versus institutional constraints: a simulation study of financial misreporting by CEOs,” Journal of Business Ethics, Springer, 93(2), 33-52.
Cheng, S.S., Padgett, D.R. and Parekh, V. (2013), Crisis Response across borders: a comparative study of two companies’ image repair discourse, International Journal of Business and Social Science, 4(5), May 124-140.
Chakrabarti, R., Megginson, W., Yadav & Pradeep K. (2008). Corporate Governance in India. Journal of Applied Corporate Finance, 20(1), 59.
Chopra, A. (2011), “Satyam fraud, not an accounting failure,” Business Standard, 25 January. Available at http://www.business-standard.com.
Choo, F. and Tan, K. (2007) ‘An “American Dream” Theory of Corporate Executive Fraud’, Accounting Forum, Issue 31: 203-215.
COSO (2010), “Fraudulent financial reporting: 1987-2007,” Committee of Sponsoring Organizations of the Treadway Commission, available at http://www.coso.org.
D’Monte, L. (2008). Satyam: just what went wrong? Rediff India Abroad.
Dagar, S.S. (2009). How Satyam was sold The untold story: How the IT services major was rescued against all odds.Business Today, July.
Damodaran, M. (2009), “Listed firms to get new conduct code,” Financial Chronicle, available at http://wrd.mydigitalfc.com.
Deloitte Forensic Center (2011), “Fraud, Bribery and Corruption Practices Survey,” available at http://www.deloitte.com.
Dixit, N. (2009), What Happened at Satyam? March 1, available at Wharton@knowledge.com
Fernando, A.C. (2010), Satyam: Anything but Satyam, Loyala Institute of Business Administration. Available at www.publishingindia.com.
Haugen, S. and Selin, J.R. (1999) “Identifying and controlling computer crime and employee fraud”, Industrial Management & Data Systems, 99(8),340-344.
Hindustan Times (2015), “Satyam Scam: All you need to know about India’s biggest accounting fraud,” April 9.
Hogan, C.E., Razaee, Z, Riley, R.A. and Velury, U.K. (2008), “Financial statement fraud: insights from the academic literature,” Auditing: A Journal of Practice & Theory, 27(2), November, 231-252.
ICAI (2009). ICIA finds ex Satyam CFO, Price Waterhouse auditors guilty. Outlook India.com.
Ingam, K. (2015), India’s Satyam Scandal: A Blessing in Disguise? 20 Dec. Recorder Press.
Jeffords, R. (1999), “How useful are the Treadway risk factors?”, Internal Auditor, 49(2) June.
Kahn, J. (2009). The Crisis exposes all the flaws. Newsweek.
Kaul, V. (2015), Satyam scam: Ramalinga Raju, the man who knew too much, gets 7 years in jail, April 10.
Khedekar, D. (2010), Corporate Crime: a comparison of culture at Enron and Satyam, Economics & Business Journal: Inquiries and Perspectives, 3(1) Oct. 156-175.
Kripalani, M. (2009). India’s Madoff Satyam scandal rocks outsourcing industry. Business Week.
KPMG Fraud Survey 2009, 2003, 1998, 1994. Available at www.kpmginstiutes.com.
Krishnan, A. (2014), Finally, the truth about Satyam, The Hindu Business Line, July 18.
Manoharan, T.N. (2011), “Financial Statement Fraud and Corporate Governance,” 11 November. Available at www.slideserve.com.
Miller, G.S. (2006), “The press as a watchdog for accounting fraud,” Journal of Accounting Research, 44(5), December, 1001- 1033.
Norris, F. (2011), “Indian Accounting Firm is Fined $7.5 million over fraud at Satyam,” The New York Times, April 5, 2011.
Niazi, A. and Ali, M. (2015), The Debacle of Satyam Computers Ltd.: A Case Study from Management’s Perspective, Universal Journal of Industrial and Business Management, 3(2), 58-65.
PricewaterhouseCoopers (PwC, 2007), “Global Economic Crime Survey.” Available at: http://www.pwc.com.
Ramachadran, S. (2009). Raju brings down Satyam, shakes India. Asia Times Online Ltd.
Rezaee, Z. (2005). Causes, consequences, and deterrence of financial statement fraud. Critical Perspectives on Accounting, 16(3), 277-298.
SFIO Report published in the Pioneer (New Delhi), May 4, 2009, p 10
Schrand and Zechman (2007), “Executive overconfidence and the slippery road to fraud,” http://faculty.chicagobooth.edu.
Sharma, S. and Brahma (2000), “A Role of Insider in banking Fraud,” available at http;// manuputra .com.
Sharma, J.P. (2015), What went wrong with Satyam? Paper presented at WCFCG Global Convention, in association with Institute of Directors, available at www.
Shirur, S. (2011), “Tunneling vs agency effect: a case study of Enron and Satyam,” Vikalpa, 36(3), July-September, 9-20.
Shubhashish (2015), “All that you need to know about the Satyam Scam,” DNA, April 9.
Smith, E. R. (1995). A positive approach to dealing with embezzlement. The White Paper, August/September, 17-18.
The Hindu (2015), Satyam Scandal: Who, what and when? May 11.
Telberg, R. “Credibility Crisis Needs Global Curve,” Al Large, August 11, 2003, www.cpa2bis.com
Timmons, H. and Wassener, B. (2009), “Satyam chief admits huge fraud,” January 8, New York Times Online, available at www.nytimes.com.
Vasudev, P.M. (2010), Satyam and Enron: A Tale of two companies and two countries, Sept. 14, Deccan Herald, available at http://www.deccanherald.com/content/96271/satyam-amp-enron-tale-two.html.
Willison, R. (2006) “Understanding the offender/environment dynamic for computer crimes”, Information Technology & People, 19(2), 170 - 186
Winkler, D. India’s Satyam Accounting Scandal, February 1, 2010, The University of Iowa Center for International Finance and Development. Available online at http://blogs.law.uiowa.edu.
Wharton (2009), Scandal at Satyam: Truth, Lies and Corporate Governance, available at knowledge@wharton.
Ziegenfuss, D.E. (1996) “State and local government fraud survey for 1995”, Managerial Auditing Journal, 11(9), 50-55.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).