The truth about satyam

Abstract

Earlier this month, a special court in Hyderabad sentenced B Ramalinga Raju and nine others to seven years in prison. Media reports have suggested that corporate governance standards have improved post Satyam failure.

The government and the Securities and Exchange Board of India (Sebi) have strengthened corporate governance regulations. The Companies Act, 2013, has a code of conduct for independent directors. Companies must change their external auditor every five years (individual auditor) or 10 years (an audit firm). The external auditor must report fraud directly to the government. Shareholders can sue directors and auditors in class action.

The Satyam fraud, the biggest known accounting scam in India, shook the faith of Indian and international investors in the country’s corporate governance. Especially because Satyam ticked all the right boxes: audited by PricewaterhouseCoopers, a Big Four accounting firm; a board of directors that included an eminent Harvard Business School professor of accounting and the dean of the Indian School of Business; awarded for corporate governance; listed on the New York Stock Exchange; impressive international customers; and the first Indian company to adopt International Financial Reporting Standards (IFRS). Raju appeared regularly on television and in business magazines. Read more at: https://economictimes.indiatimes.com/blogs/et-commentary/the-truth-about-satyam/