Satyam, in Sanskrit as most have been commenting ) means truth. Activities of Satyam Computers , hardly any truth in what they did over the last several years.
Timing ( of the disclosure not the activity as such) could not have been worse. Recession, markets are down, confidence down, people postponing purchasing decisions and you have this.
One thought that the Indian markets will bounce back for the simple reason that India has its own consumption story . This was bound to renew at some stage.
That is going to take some time now. Of course public memory is short especially in India but still , I think it would be atleast a few months before normalcy comes back
What was the technology used ?
Inflating cash and bank. They have broken new ground . Most of the balance sheets, overstatement of profits is generally hidden under Debtors and Inventories. I thought being a IT Company the maximum possibility is in Debtors. Covering up cash, that is extraordinary. These people have a lot of foreign accounts. Easier to forge some bank statetements possibly. Auditors can't possibly get confirmations directly in all the cases
They must have shown some in transit amounts between Bank accounts . They could have also played around with exchange rates.They could have covered some of the foreign accounts by reflecting higher amounts in INR. Just a possibility
Debtors being overstated is an old trick and liability being understated is also an old trick
They were possibly trying to sell Maytas shares to Satyam ( Promoter's shares in Maytas) and make some fictitious payments to the sellers of Maytas shares. In Satyam's books , it becomes Investment from Cash. It becomes easier to manage . The cash payout to Maytas promoters would have been a fiction and it becomes the Raju's problem to manage the same. There are no taxes since this is a listed Company and the tax is exempt.
This possible methodology came out in a discussion with a ex colleague of mine.
What a blow to the auditors PWC. Most of these Big 4 as they call themselves , go around with a chip on their shoulder. People may remember Arthur Andersen before Enron. They used to walk around with a lot of pride ( arrogance?). Just one Enron brought them down. Could it be the turn of PWC now atleast in India
Of course one can't comment as to their culpability before getting to knwo the full facts. The basic problem is , all these people just make test verification. They have high paid employees and they have to necessarily economise on time to maximise their audit fees.
They take representation for most . What is the audit for is we have to take Management representation for all. Shareholderss and the Investors are the suckers. Very sad state of affairs. PWC may get out of this with mild damage if it can be proved that Satyam indulged in Forgery , either alone or in conjunction with others eg Bankers etc.
This also , may be is a sign of globalisation. Earlier we used to have multiple small frauds, now replaced by a few big ones a la USA
Timing ( of the disclosure not the activity as such) could not have been worse. Recession, markets are down, confidence down, people postponing purchasing decisions and you have this.
One thought that the Indian markets will bounce back for the simple reason that India has its own consumption story . This was bound to renew at some stage.
That is going to take some time now. Of course public memory is short especially in India but still , I think it would be atleast a few months before normalcy comes back
What was the technology used ?
Inflating cash and bank. They have broken new ground . Most of the balance sheets, overstatement of profits is generally hidden under Debtors and Inventories. I thought being a IT Company the maximum possibility is in Debtors. Covering up cash, that is extraordinary. These people have a lot of foreign accounts. Easier to forge some bank statetements possibly. Auditors can't possibly get confirmations directly in all the cases
They must have shown some in transit amounts between Bank accounts . They could have also played around with exchange rates.They could have covered some of the foreign accounts by reflecting higher amounts in INR. Just a possibility
Debtors being overstated is an old trick and liability being understated is also an old trick
They were possibly trying to sell Maytas shares to Satyam ( Promoter's shares in Maytas) and make some fictitious payments to the sellers of Maytas shares. In Satyam's books , it becomes Investment from Cash. It becomes easier to manage . The cash payout to Maytas promoters would have been a fiction and it becomes the Raju's problem to manage the same. There are no taxes since this is a listed Company and the tax is exempt.
This possible methodology came out in a discussion with a ex colleague of mine.
What a blow to the auditors PWC. Most of these Big 4 as they call themselves , go around with a chip on their shoulder. People may remember Arthur Andersen before Enron. They used to walk around with a lot of pride ( arrogance?). Just one Enron brought them down. Could it be the turn of PWC now atleast in India
Of course one can't comment as to their culpability before getting to knwo the full facts. The basic problem is , all these people just make test verification. They have high paid employees and they have to necessarily economise on time to maximise their audit fees.
They take representation for most . What is the audit for is we have to take Management representation for all. Shareholderss and the Investors are the suckers. Very sad state of affairs. PWC may get out of this with mild damage if it can be proved that Satyam indulged in Forgery , either alone or in conjunction with others eg Bankers etc.
This also , may be is a sign of globalisation. Earlier we used to have multiple small frauds, now replaced by a few big ones a la USA
