Corporate Fraud and Greed
The unfolding Satyam sage, India’s Enron, has been a watershed event in Indian corporate history. According to the founder’s own public confession, Satyam had inflated its reported revenues by 25%, its operating margins by over 10 times, and its cash and bank balance by over 1 billion dollars. The magnitude of this fraud makes it by far the biggest accounting scandal in India’s history (Ingram, 2015). The Satyam scandal highlights the importance of securities laws and CG in emerging markets (Bhasin, 2015). There is a broad consensus that emerging market countries must strive to create a regulatory environment in their securities markets that fosters effective CG. India has managed its transition into a global economy well, and although it suffers from CG issues, it is not alone as both developed countries and emerging countries experience accounting and CG scandals. The Satyam scandal brought to light, once again, the importance of ethics and its relevance to corporate culture (Bhasin, 2013, a). The fraud committed by the founders of Satyam 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” (Chen, 2010) All kind of scandals/frauds have proven that there is a need for good conduct based on strong ethics. The Indian government, in Satyam case, took very quick actions to protect the interest of the investors, safeguard the credibility of India, and the nation’s image across the world. Moreover, Satyam fraud has forced the government to re-write CG rules and tightened the norms for auditors and accountants (Bhasin, 2013b). The Indian affiliate of PwC “routinely failed to follow the most basic audit procedures. The SEC and the PCAOB fined the affiliate, PwC India, $7.5 million in what was described as the largest American penalty ever against a foreign accounting firm” (Norris, 2011). According to Mr. Chopra, President, ICAI (January 25, 2011), “The Satyam scam was not an accounting or auditing failure, but one of CG. This apex body had found the two PWC auditors prima-facie guilty of professional misconduct.” The CBI, which investigated the Satyam fraud case, also charged the two auditors with “complicity in the commission of the fraud by consciously overlooking the accounting irregularities”. The Satyam fraud has shattered the dreams of different categories of investors, shocked the government and regulators alike and led to questioning the accounting practices of statutory auditors and CG norms in India (Bhasin, 2015a, 2016a). The auditor is paid to ask questions; in this case it seems to have been paid not to ask any. The company could not have hoodwinked the investors without the auditor being on its side. This was no complicated accounting fraud like Enron was. The culture at Satyam, especially dominated by the board, symbolized an unethical culture.https://www.scirp.org/journal/PaperInformation.aspx?PaperID=30220
