Satyam Scandal

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Q2. What were the changes made in the corporate governance and the Indian Companies’ Act after the Satyam Scandal occurred?

Answer-

Satyam Scandal in effect was a massive accounting scandal. Various accounting and financial statements had been manipulated and forged by intentional omissions, inadequate disclosures and by intentional misapplication of the accounting policies. Assets of the company had been overstated than the actual ones, fictitious deposits had been shown in the bank accounts with interests on it. It was not only an example of bad governance but also of dishonest governance intending to siphon off public funds from the Company by manipulating the data and accounts in connivance with the external auditors. Ramalinga Raju,
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After the scandal, the Confederation of Indian Industries took up the task of setting committee to suggest reforms. National Association of Software and Services Companies established an ethics committee headed by Narayana Murthy so that no scandals could take place in the near future and harm the economic status of the country. It also suggested reforms relating to audit committees, shareholder rights, and whistleblower policies.
The ministry of Corporate Affairs issued a set of voluntary guidelines to ensure a system of checks and balances. SEBI (Securities Exchange Board of India) amended its agreements to include a chief financial officer.
The amended Indian Company Law incorporated the responsibility and accountability of independent directors and auditors and provided for the compulsory rotation of the auditors and audit firms. It provided for the duty of the auditors to report the fraudulent acts noticed by them during the performance of their duties.
Thus, the corporate governance after Satyam scandal had to be in conformity with the amended Companies Act as well as the other guidelines. This scandal had also exposed the role of dishonest external auditors and had forced the government to provide for checks and balances on them and such
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