Massive Accounting Fraud Revealed at Indian IT Service Provider

Source: CSB Insighter, Corporate Strategy Board




Massive Accounting Fraud Revealed at Indian IT Service Provider
Wall Street Journal, 7 January 2009

Satyam Computer Services' founder and chairman B. Ramalinga Raju resigns after admitting to falsifying company accounts and inflating revenue and profit figures over several years. In his resignation letter to the board of directors of the company, Mr. Raju described the perpetuation of fraud "like riding a tiger, not knowing how to get off without being eaten". The scandal came as a shock to India's business community (BusinessWeek, 7 January 2009).

Our [CSB Insighter's] View: Fraudulent behavior by your suppliers (and even your second- and third-tier suppliers) and customers can expose your company to risk. Satyam's clients include a number of notable US and European companies that may have concerns about how this scandal will affect their own reputation, and will now be faced the task of quickly finding another IT service provider. (About 240 customers spend more than $1 million per year with Satyam, 44 of whom spend over $10 million.) One way to reveal financial risks your suppliers or customers are taking is through conversations with their suppliers or customers.