Corporate Governance Failure and Creative Accounting: A Case Study of the Satyam Computer Services Scandal

Abstract

The Satyam Computer Services scandal is a landmark case of fraudulent corporate activity, which has demonstrated serious gaps in corporate governance, accountability, and financial reporting systems in India. The comparison of Enron, WorldCom and Satyam reveals that corporate accounting fraud is an increasing menace in terms of frequency and magnitude. As empirical evidence has revealed, the sheer level of increase in such frauds has undermined the quality of financial reporting, caused massive economic losses and undermined the confidence of investors in the utility and credibility of financial reporting. The rising trend of white-collar crimes requires tougher punishments, exemplary punitive actions, and sound administration of the law in accordance with accountable governance. This study presents an inquiry and analysis of the Satyam Computer Services creative accounting scandal, highlighting the critical role played by ethics and corporate governance, using data sourced from Scopus and following PRISMA guidelines, with no restrictions on publication year and based on predefined keywords along with clearly defined inclusion and exclusion criteria. The example of the fraud committed by the founders in 2009 is the illustration of the way the science of conduct may be deeply impacted by human greed, ambition, and desire to dominate power, wealth, fame, and recognition. Satyam fell into a tunnelling effect unlike Enron which experienced agency problems that lead to its downfall. The scandal highlights the importance of securities laws and corporate governance in the emerging market. In fact, the Satyam fraud has given the Indian government the impetus to increase the norms of corporate governance so as to ensure that similar frauds do not recur. As such, significant financial reporting frauds should be examined with the aim of learning and approaches to be taken to curb such events in the future.