Corporate Fraud Risk Management: A study on India

Topics: Corporate governance, Board of directors, Non-executive director Pages: 34 (10704 words) Published: April 12, 2014
Abstract
This study uses the case of Satyam Computer Services Ltd. as a base to analyze the e ectiveness of India's corporate governance in mitigating fraud risk. Through a comparative analysis of Satyam's corporate governance framework with that prevalent in the United Kingdom (U.K.), gaps in Satyam's corporate governance framework, both at a theoretical and implementation level are indenti ed. Three other reasons which increased the probability of fraud at Satyam i.e. an in house internal audit team, family ownership and pressure for growth are analyzed. The study draws on social research on risk and in particular from Hilgartner(1992)[23] to analyze the e ectiveness of controls in place at Satyam. The study uses insights from the application of Hilgartner's theory to Satyam to provide suitable recommendations for mitigating fraud risk in India.

1 Introduction
Following the Enron crisis, stringent measures to mitigate fraud risk were set in place through the Sarbanes-Oxley directive and corporate governance gained importance as a means to mitigate fraud risk in developed nancial markets. However, in emerging markets, corporate fraud risk management still remains elusive. According to E&Y'S 9th global fraud survey[14] the risk of fraud within emerging economies is the highest, with over 20% of rms falling victim to fraud. This study analyzes the e ectiveness of corporate governance as a mechanism to mitigate fraud risk in India and contributes, through suitable recommendations, to literature on fraud risk in India. The Satyam scandal, arguably India's Enron, is a recent example of a high pro le corporate fraud. This study uses Satyam as a base to analyze the e ectiveness of India's corporate governance in mitigat- ing fraud risk. Through a comparative analysis of Satyam's corporate governance framework with that of the U.K., gaps in Satyam's corporate governance framework, both at a theoretical and implementation level are indenti ed.

Three other reasons for fraud at Satyam i.e. an in house internal audit team, family ownership and pressure for growth are analyzed. The study draws on social research on risk and in particular from Hilgartner(1992)[23] to analyze the e ectiveness of controls in place at Satyam. The study uses insights from the application of Hilgartner's theory[23] to Satyam to provide suitable recommendations for mitigating fraud risk in India.

fSec.2g of this study elaborates on the research methodology used by the study. fSec.3g provides a literature review to help rmly link the analysis to existing literature. fSec.4g analyzes and evaluates Satyam's corporate governance. fSec.5g examines other reason for fraud while fSec.6g applies Hilgar- tner's theory to Satyam to help assess the controls in place at Satyam. Using insights from the case, fSec.7g sheds light how to better manage corporate fraud risk in India. fSec.8g concludes this study. 2 Research Methodology

This research depends on secondary data to evaluate the e ectiveness of controls in India and the analysis is undertaken through the mean of the case of Satyam Computers Ltd. A case study based approach has been chosen because it facilitates in drawing out, through a real life example, the subtleties of implementation of India's corporate governance framework. It helps better analyze other factors that may contribute to fraud through particularistic details which may have been lost in a more generic approach. Moreover, the public availability of data is an important factor in a study of this nature as data pertaining to fraud control mechanisms is generally sensitive and dicult to obtain for a large number of rms. The case study of Satyam is chosen because it is currently impacting the corporate landscape in India. Moreover, Satyam had been hailed for it governance standards and therefore forms an interesting base for research. The study uses secondary data for carrying out: 1. An assessment of the extent of the compliance levels of...

References: [5] Financial Services Authority. The combined code on corporate governance, 2003. http://www.
[12] Financial Reporting Council. The combined code and associated guidance, 2009. http://www.
Accounting Research, 13(2), 1996.
[14] Ernst and Young. 9th global fraud survey, fraud risk in emerging markets, 2006. http://ey.com/
global/Content.nsf/International/FIDS_-_9th_Global_Fraud_Survey_-_Press_Release.
[15] F. Eugene and M. Jensen. Separation of ownership and control. Journal of Law and Economics,
26:301{325, 1983.
[17] New York Stock Exchange. Corporate governance rules, 2003. http://www.nyse.com/pdfs/
finalcorpgovrules.pdf.
[19] David B. Farber. Restoring Trust After Fraud: Does Corporate Governance Matter?, 2004.
Contemporay
nancial digest, 1998.
[21] S.L. Gillian. Recent developments in corporate governance: An overview. Journal of Corporate
nance, 2006.
[24] Ian Huntington. Fraud: Prevention and Detection. Buttersworth, 1992.
[26] Satyam Computer Services Ltd. Form20-f, 2008. http://www.mahindrasatyam.net/investors/
documents/sec_filings/W0F_March_2008.pdf.
[27] Satyam Computers Ltd. Satyam corporate governance report 2006-07, 2007. http://www.satyam.
report, 2003. http://www.datatrace.com/legal/information.htm.
[31] Securities & Exchanges Board of India. About clause 49, 2009. http://www.clause49.com/
clause49.htm.
clause 49 of listing agreement, 2004. http://www.nfcgindia.org/clause2004.htm.
164708.pdf, 2009.
[36] Shweta Rajpal. Satyam - all is well that ends well, 2009. http://www.contentwriter.in/
articles/others/satyam.htm.
[39] Dhiren Shah. Satyam-maytas deal: Impact on the companies, 2008. http://www.rediff.com/
money/2008/dec/22maytas-deal-impact-on-the-companies.htm.
Financial Analysts Journal, 60(3):33{34, 2004.
IIMB Management Review, 9(4):5{18, 1997.
[42] Shivshanker Verma. Can we prevent another satyam?, 2009. http://www.domain-b.com/
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Risk management Essay
  • risk management Essay
  • Essay on Risk management
  • Fraud Risk Management Essay
  • Corporate Fraud Essay
  • Assignment 2 Corporate Risk Management Essay
  • Corporate Risk Management Exam Essay
  • Risk Management Case Study Essay

Become a StudyMode Member

Sign Up - It's Free
Rejestracja | Terminada Auschwitz: Los Nazis y La Solucion Final 2005 | A Man Apart (2003) 720p BRRip 950MB