Journal 11

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Nikhil Sinha
BMGT 422
2/1/2013
Individual Ethics Paper: AAER 3257

Satyam Computer Services was an Indian IT services company based in Hyderabad, India. During the years 2005-2009, Satyam was exposed in falsifying $1 billion in fictitious cash balances and other interest bearing deposits. During this time period, 6,000 false invoices were created and entered into the company’s general ledger and recorded as if they were other things like revenue, income, and accounts receivable. Satyam went ahead and publically filed all of this “additional” money in their financial statements while former officers and senior managers constructed false bank statements, confirmations, and additional supporting documents to show the “legitimacy” of the purportedly earned $1 billion. As a result of this corporate deceit, Satyam duped clients, investors, and markets all over the world into believing it was a thriving and financially sound company. As soon as their lies surfaced, Satyam realized losses of over $450 million immediately, and impending legal doom.

The Pricewater House affiliates in India failed to uncover the fact Satyam’s upper management was falsifying its financial stature and were accused of conducting insufficient audits thus releasing deficient audit reports. Because of Satyam’s international standings, their audit reports were to be congruent with PCAOB Standards. PW India failed to comply with the Standards however, and inaccurately maintained control of the audit process for cash, deposits, and account receivables. As soon as the former Satyam chairman came forward with details of the fraud, much of the blame was shouldered onto PW India due to their negligence in establishing quality control, and thus revealed glaring inefficiencies throughout the entire firm. In failing to follow the most basic of audit procedures, PW India was fined by the SEC $7.5 million. According to the NY Times, this is the largest American penalty ever given to a foreign...
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