Satyam Fiasco
India’s 4th biggest IT Company has given rude jolt to India’s financial system. Till the other day, India prided itself on better regulatory and control mechanism vis-a-vis US and European countries. Indian financial experts patted their back and announced that they are better prepared to nip such financial frauds in their bud. But the disclosures by Satyam CEO prove otherwise. The disclosures by CEO mirrors the classic case of inflated profits forming a vicious circle and company tying itself, in to knots. In order to tackle the inflated profits over the years, company was getting in to tailspin and going deeper and deeper in to the web. Company’s growth and rise in level of operations made the things all the more difficult.
Satyam did try to pump in real assets to fill up fictitious assets by merging Maytas with Satyam but the move was resisted by all stakeholders of the company. The things looked ominous as four independent directors quit over last few days. Probably employees were aware of the insider information. That is why about hundred odd had decided to leave the company even during such tumultuous times. Exodus would have been much faster in case the economic situation would have been better. Even in such gloomy situation if the employees had decided to take up cudgels against the company practices and decided to leave, it conveys much more than what has been disclosed till now about the company’s situation.
More than CEO’s, in such fiascos, the blame lies with the auditors, both internal and external. If India’s financial sector has to offer some resilience, now is the time. The practice of auditing and submitting voluntary disclosures have to be looked in to. ICAI, Institute of Chartered Accountants of India, needs to introspect and come out with long delayed reforms to cleanse the practise of auditing. All CAs who have been involved in such practices should have punitive actions taken against them. Murmurs and whispers have begun floating around the financial markets, who next.
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