1.0 Companies Background 1.

1 Background of Satyam Computer Services Satyam Computers Services Limited (SCSL) was incorporated in the year 1987 as a private limited company at Andra Pradesh. SCSL is ourth lar!est provider o "n ormation #echnolo!y services in "ndia. Satyam has consistently innovated across various aspects o the enterprise$processes% technolo!y% &usiness and en!a!ement models% and service o erin!s. Satyam o ers a ran!e o e'pertise that includes( So tware )evelopment Services% *m&edded Systems% *n!ineerin! Services (CA)+CA,+CA*)% Systems "nte!ration% *nterprise -esource Plannin! Solutions% *nterprise Application "nte!ration% Customer -elationship ,ana!ement% Supply Chain ,ana!ement% Product )evelopment% *lectronic Commerce% and Consultin!. As "# services &ecame more and more technolo!y$centric and !eneric% hence now Satyam o ers services to enhance the customers &usiness needs. Satyam startin! with deeper ocus on customi.ed "# solution on insurance% inancial services% telecom% manu acturin!% transportation% health care% /ioin ormatics and -etail sectors. #he company has adopted the latest Certi ications li0e C,," Level 1% PC,,% "S2 37441% /S 11444% "S2 34444% AS9144 and Si' Si!ma ,ethodolo!ies. #he company has settin! up o a su&sidiary company in Cairo% *!ypt to service in and around ,iddle *ast -e!ion and to tap urther potential &usiness opportunities. "t also proposed to incorporate another su&sidiary in China in the province o 5an6in! or settin! up a development center. 1.2 Background of Welli Multi Corporation Berhad 7elli ,ulti Corporation /erhad is an investment holdin! company en!a!ed in the provision o mana!ement services. #he Company operates in ive se!ments( palm 0ernel manu acturin!% which is en!a!ed in the processin! o copra and palm 0ernel and tradin! o palm 0ernel oil% coconut oil% palm 0ernel ca0e and copra ca0e8 oodstu % which is en!a!ed in the manu acturer% tradin! and the distri&ution o all 0inds o oodstu 8 transportation% which is en!a!ed in the transportation and orwardin! services8 investment holdin!% which is en!a!ed in the investment holdin! and providin! mana!ement services% and others% which is en!a!ed in the utures &ro0in!% importin!% e'portin!% distri&ution and !eneral tradin! o le'i&le pac0a!in!% plastic sheet products% plastic li!htin! di user% ast movin! consumer products and health related ood. "ts ma6or su&sidiaries include 9ouseason 9oodstu % "ndustries (,) Sdn. /hd. and 9ourseason #radin! Sdn. /hd. #he company was ormerly 0nown as 7elli ,ulti Corporation /erhad and chan!ed its name to *ner!reen Corporation /erhad in 5ovem&er 3448. *ner!reen Corporation /erhad is &ased in Petalin! :aya% ,alaysia.

2.0 Descri e the nature of the fraud and !hen it happened. 2.1 Satyam Computer Services #he Satyam Computer Services scandal was pu&licly announced on 7 :anuary 3449% when Chairman -amalin!a -a6u con essed that Satyam;s accounts had &een alsi ied . #he nature o the Satyam Computer Services raud in the inancial reportin! is the /alance Sheet carries as o Septem&er <4% 3448 as &elow($ a) "n lated (non$e'istent) cash and &an0 &alances o 14.=4 &illion rupees (>1.4= &illion) (as a!ainst 1<.?1 &illion re lected in the &oo0s) &) An accrued interest o <.7? &illion rupees which is non$e'istent. c) An understated lia&ility o 13.<4 &illion rupees on account o unds arran!ed. d) An overstated de&tors position o =.94 &illion rupees (as a!ainst 3?.11 &illion re lected in the &oo0s) 9or the Septem&er @uarter (A3) we reported a revenue o 37.44 &illion rupees and an operatin! mar!in o ?.=9 &illion rupees (3= pct o revenues) as a!ainst the actual revenues o 31.13 &illion rupees and an actual operatin! mar!in o ?14 million rupees (< percent o revenues). #his has resulted in arti icial cash and &an0 &alances !oin! up &y 1.88 &illion rupees in A3 alone. #he !ap in the /alance Sheet has arisen purely on account o in lated pro its over a period o last several years (limited only to Satyam standalone% &oo0s o su&sidiaries re lectin! true per ormance). 7hat started as a mar!inal !ap &etween actual operatin! pro it and the one re lected in the &oo0s o accounts continued to !row over the years. "t has attained unmana!ea&le proportions as the si.e o company operations !rew si!ni icantly (annuali.ed revenue run rate o 113.7? &illion rupees in the Septem&er @uarter% 3448% and o icial reserves o 8<.93 &illion rupees). #he di erential in the real pro its and the one re lected in the &oo0s was urther accentuated &y the act that the company had to carry additional resources and assets to 6usti y hi!her level o operations $$ there&y si!ni icantly increasin! the costs. *very attempt made to eliminate the !ap ailed. As the promoters held a small percenta!e o e@uity% the concern was that poor per ormance would result in a ta0e$over% there&y e'posin! the !ap. "t was li0e ridin! a ti!er% not 0nowin! how to !et o without &ein! eaten.

2.2 Welli Multi Corporation Berhad #he nature o the raud or 7elli ,ulti Corporation /erhad is ormer directors convicted or misleadin! inancial statement. #he Buala Lumpur Sessions Court convicted An! Sun /en!% ormer ,ana!in! )irector% and An! Soon An% a ormer *'ecutive )irector C ,em&er o the Audit Committee o 7elli ,ulti Corporation /erhad (7,C/)% or urnishin! misleadin! revenue i!ures which consisted o over -,1=1 million in ictitious sales in its audited inancial statement or the year ended <1 )ecem&er 3441. #he company also alle!edly urnished a misleadin! statement contained in its @uarterly report or the inancial period ended ,arch <1% 344? to /ursa ,alaysia Securities /hd &etween ,ay 39 and :une 1< in the same year. Apart rom that% 7C,/ was accused o urnishin! a misleadin! statement contained in its @uarterly report or the inancial period ended :une <4% 344? to /ursa ,alaysia Securities on Au!ust 38% 344?. #he company also alle!edly urnished a misleadin! statement contained in its @uarterly report or the inancial period ended Sept <1% 344? to /ursa ,alaysia Securities &etween 9e&ruary 37 and 9e&ruary 38 in 3447. 7C,/ was a listed corporation on the Second /oard o /ursa ,alaysia. #he misleadin! statement which was released to the mar0et% made a si!ni icant impact on the mar0et price o the company. "n this case the share price dropped &y =<D a ter news o the misleadin! statement &ecame 0nown to the pu&lic in 3448% a ter 7,C/;s inancial statement or 3441 was restated. 7C,/ was then listed on the second &oard o /ursa ,alaysia &ut chan!ed its name to *ner!reen Corp /hd in 5ovem&er 3448. *ner!reen was delisted rom the stoc0 e'chan!e on Au! 17% 3449 a ter /ursa Securities ound that the companyEs inancial condition and level o operations did not warrant continued tradin! or listin!. /rothers An! Sun /en! and An! Soon An% a!ed ?= and ?4 respectively% pleaded !uilty to the char!es under Section 133/(a)(&&) read to!ether with Section 133(1) o the Securities "ndustry Act 198< (S"A). /oth An! Sun /en! and An! Soon An were convicted on the irst char!e under Section 133/(a)(&&) Securities "ndustry Act 198< (S"A) read to!ether with Section 133(1) o the same Act while three other char!es under the same section were ta0en into consideration in sentencin!. Sessions Court :ud!e% Puan -o.ana&t Ali Fuso sentenced each o the accused to 1 day 6ail and a ine o -,=44%444 in de ault o 1 year imprisonment.

".0 #o! !as it discovered$ ".1 Satyam Computer Services #his raud cases discovered a ter the chairman o "ndia;s Satyam Computer Services% -amalin!a -a6u con essed that Satyam;s accounts had &een alsi ied% sayin! pro its had &een in lated over the last several years. -amalin!a -a6uEs words in the letter " would li0e the /oard to 0now( 1. #hat neither mysel % nor the ,ana!in! )irector (includin! our spouses) sold any shares in the last ei!ht years $$ e'ceptin! or a small proportion declared and sold or philanthropic purposes. 3. #hat in the last two years a net amount o 13.<4 &illion rupees was arran!ed to Satyam (not re lected in the &oo0s o Satyam) to 0eep the operations !oin! &y resortin! to pled!in! all the promoter shares and raisin! unds rom 0nown sources &y !ivin! all 0inds o assurances (Statement enclosed% only to the mem&ers o the &oard). Si!ni icant dividend payments% ac@uisitions% capital e'penditure to provide or !rowth did not help matters. *very attempt was made to 0eep the wheel movin! and to ensure prompt payment o salaries to the associates. #he last straw was the sellin! o most o the pled!ed share &y the lenders on account o mar!in tri!!ers. <. #hat neither me% nor the ,ana!in! )irector too0 even one rupee+dollar rom the company and have not &ene itted in inancial terms on account o the in lated results. =. 5one o the &oard mem&ers% past or present% had any 0nowled!e o the situation in which the company is placed. *ven &usiness leaders and senior e'ecutives in the company% such as% -am ,ynampati% Su&u )% #.-. Anand% Besha& Panda% Girender A!arwal% A.S. ,urthy% Hari #% S.G. Brishnan% Gi6ay Prasad% ,anish ,ehta% ,urali G% Sriram Papani% Biran Bavale% :oe La!iola% -avindra Penumetsa8 :ayaraman and Pra&ha0ar Iupta are unaware o the real situation as a!ainst the &oo0s o accounts. ".2 Welli Multi Corporation Berhad "t was discovered when 7elli ,ulti Corporation /erhad re@uest to delay its su&mission o inancial report. "t had &een delayed or 13 month. 9rom this situation the inancial report was suspended then several investi!ations have &een carried out and raud was discovered.

%.0 What actions !ere taken against the company and y !hom$ %.1 Satyam Computer Services #he Supreme Court !ranted &ail to ormer Satyam C*2 / -amalin!a -a6u and two others on 5oveem&er =% 3411. -a6u has &een in 6ail or two years and ei!ht months. He was arrested in connection with the multi$crore accountin! raud involvin! Satyam Computers. #he C/" on 5oveem&er <% 3411 moved an a idavit in the Supreme Court opposin! &ail pleas o -amalin!a -a6u and his &rother -ama -a6u% 0ey accused in the -s 1=%444 crore Satyam scam case% and said it was certain that once out o 6ail they would tamper with evidence and delay trial. /ut the Supreme Court &ench consistin! o :ustice )alveer /handari and :ustice )ipa0 ,isra said rom the acts o the case and considerin! the totality o the circumstances% it was appropriate to !rant them &ail.1 ,r -amalin!a -a6u says that he was tryin! to cover up the losses at Satyam and in doin! so !ot cau!ht up in a vicious cycle o lies and de&ts. He says this attempt to hide the losses rom investors and shareholders was li0e Jridin! a ti!er% not 0nowin! how to !et o without &ein! eatenJ. Accordin! to ,r -amalin!a -a6u;s statement% a&out >1&n (K4.?1&n)% or 9=D o the cash on the company;s &oo0s% was made up $ and analysts say it was the manipulation o the cash low which could have &een one reason why the deceit was undetected. ,any analysts also say that the chase or hu!e pro its and the desire to 0eep up with the &rea0$nec0 speed o "ndia;s >14&n outsourcin! industry;s !rowth rates that may have &een &ehind ,r -amalin!a -a6u;s motivation in ud!in! the accounts at his irm. /esides% under the directions o the new ,ahindra mana!ement team% Satyam Computer Services restated its inancial results or the period 3443 to 3448. #hese restated results were pu&lished in Septem&er 3449. 2n 1 9e&ruary 3449% the si'$mem&er &oard appointed &y the Iovernment o "ndia named A. S. ,urthy as the new C*2 o the irm with immediate e ect. ,urthy% an electrical en!ineer% has &een with Satyam since :anuary 199= and was headin! the Ilo&al )elivery Section &e ore &ein! appointed as C*2 o the company. #he two$day$lon! &oard meetin! also appointed Homi Bhusro0han ( ormerly with #ata Chemicals) and Partho )atta% a Chartered Accountant as special advisors.3 %.2 Welli Multi Corporation Berhad
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#he Securities Commission (SC) char!ed An! Sun /en! and An! Soon An% the ormer ,ana!in! )irector and *'ecutive )irector o 7elli ,ulti Corporation /erhad (7,C/)% or our counts o urnishin! misleadin! statements to the SC and /ursa ,alaysia Securities /erhad. /oth An! Sun /en! and An! Soon An were released on &ail o -,114%444 each with condition that their international passports &e surrendered to the Court. Additionally% the SC compounded 7,C/Es ormer *'ecutive )irector and Chie *'ecutive 2 icer% #an Chin Han% or -,144%444 or 0nowin!ly authori.in! the urnishin! o a misleadin! statement to /ursa ,alaysia Securities /erhad on 38 9e&ruary 3447% in &reach o section 133/ S"A. #he misleadin! statement relates to the revenue i!ures in 7,C/Es @uarterly report or the inancial period ended <4 Septem&er 344?.< &.0 What is the est action to prevent and detect such fraud$ "n Satyam Computer Services and 7elli ,ulti Corporation /erhad scandal% &oth involved in raud o inancial reportin!. #hese two companies had overstated their revenue &y misleadin! inancial statement. So% the action to prevent and detect such raud is same or these two companies. As re@uired &y "SA <11% the auditors must per orm some o the procedures to o&tain in ormation that is used to detect the ris0s material misstatement due to raud. As auditors or Satyam and 7elli ,ulti Company% they must ma0es in@uiries o mana!ement% o those char!ed with !overnance% and o others within the entity as appropriate and o&tains an understandin! o how those char!ed with !overnance e'ercise oversi!ht o mana!ementEs processes or identi yin! and respondin! to the ris0s o raud and the internal control that mana!ement has esta&lished to miti!ate these ris0. "n the inancial statement raud prevention is stron! internal accountin! controls. "nternal controls &e!in at the transaction level o accountin! and dictate which employees can complete processes and tas0s within the company. "nternal controls may also &e instituted outside the accountin! o ice to stren!then company operations. #he C*2 and auditor o Satyam and 7elli ,ulti Company should review documentation o how the accountin! systems wor0 and identi y what controls are in place and who has responsi&ility to e'ercise those controls. A simple audit veri ies all the assets and lia&ilities. "nventory is counted. Accounts receiva&le are con irmed with customers. Cash is counted% and all lia&ilities are con irmed. #he di erence &etween assets and lia&ilities is stoc0holders; e@uity and capital stoc0. Any increase or decrease in the e@uity since the last audit is pro it or loss.

'eferences

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1) -etrieved )ecem&er 3% 3411 rom http(++investin!.&usinesswee0.com+research+stoc0s+private+snapshot.aspLprivcap"dM38?84 3) -etrieved )ecem&er 3% 3411 rom http(++en.wi0ipedia.or!+wi0i+,ahindraNSatyam <) -etrieved )ecem&er 3% 3411 rom http(++www.indiain oline.com+,ar0ets+Company+/ac0!round+Company$Pro ile+Satyam$ Computer$Services$Ltd+144<7? =) -etrieved )ecem&er 3% 3411 rom http(++www.&loom&er!.com+apps+newsL pidMnewsarchiveCsidMapIl5A=/'1pA 1) -etrieved )ecem&er 3% 3411 rom http(++news.&&c.co.u0+3+hi+&usiness+7818334.stm ?) -etrieved )ecem&er 3% 3411 rom http(++wcr.sonoma.edu+v3n1+ arrell.html 7) -etrieved )ecem&er 3% 3411 rom http(++www.malaysian&ar.or!.my+&usinessNnews+&rothersNchar!edNoverNrm<<4m.html 8) -etrieved )ecem&er 3% 3411 rom http(++en.wi0ipedia.or!+wi0i+SatyamNscandalO-estatementNo N-esults 9) -etrieved )ecem&er =% 3411 rom http(++en.wi0ipedia.or!+wi0i+SatyamNscandalO-estatementNo N-esults 14) -etrieved )ecem&er 7% 3411 rom http(++www.telu!uone.com+news+content+Satyam$ -a6u$Iranted$/ail$&y$Supreme$Court$34$8<17.htm 11) -etrieved )ecem&er 7% 3411 rom http(++www.sc.com.my+en!+html+resources+press+prN34484=11.html