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Q1)
DISCUSS THE CIRCUMSTANCES UNDER WHICH THE SAT YAM SCAM WAS EXPOSED. WHAT ACCORDING TO YOU WERE THE REASONS OF THE FRAUD?
Answer
Circumstance: Failure of Maytas acquisition Reasons for fraud: Low profit margin Maintenance of share price Prevention of takeover Situation gone out of hand
Q2)
COULD THIS FRAUD HAVE BEEN PREVENTED? WHO COULD HAVE PREVENTED IT?
Answer
Fraud could have been prevented Parties who could have prevented it: Board of Directors Auditors Bankers
Q3)
Answer
IFRS compliance Leader in HR policies Awards for best corporate governance One of 10 most well-regarded Indian companies Clients list included one-third of Fortune 500 companies
Q4)
ASSESS THE RESPONSIBILIT Y OF THE AUDIT COMMITTEE AS WELL AS INTERNAL AND STATUTORY AUDITORS IN RELATION TO SAT YAMS SCANDAL.
Answer
Main role of auditors is to assess truth and fairness of financial statements To verify veracity of assets and liabilities in the balance sheet Implicit contract of faith and trust with investors and other stakeholders Watchdog of companies on behalf of government
Q5)
Answer
Letters tone tried to make it seem like a noble, selfless act Conveyed the details of fraud as if the letter was an annual report Tried coming across as a victim of circumstance instead of mastermind fraudster Absolved family from all knowledge of his wrongdoing Had courage to dictate post-disaster course of action
Q6)
WHAT CHARACTERISTICS OF THE BOARD OF DIRECTORS PLAY A ROLE IN PREVENTING FINANCIAL STATEMENT FRAUD?
Answer
Board should be accountable for financial reports projected More power to independent directors Directors must have an active role Must do their own due diligence rather than take CEOs word for granted
Q7)
DO YOU THINK THAT MAKING REGULATORY CHANGES WOULD HELP IN PREVENTING THE FRAUD?
Answer
Institute strong internal controls Internal auditors must report directly to board Government must ensure that statutory audit must be done by neutral, unbiased party A need for surprise audits by tax authorities in big companies
Q8)
Answer
Importance of corporate governance Regulations to stop such frauds 3 fold audit team failed Despite having 5 independent directors failure to catch fraud Lack of governance at multiple levels
The board The bank SEBI Auditors