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Case Study – Governance Failure

Name Professor Course Date 1. Discuss the circumstances under which Saty’s fraud was exposed. What do you think were the reasons for the fraud? Could this have been prevented? The satys fraud was exposed due to the failure of the Maytas acquisition. The set deal which was discovered according to Ramalinga Raju was a last-ditch attempt to be able to reconstruct the financial irregularities in Satyam and also correcting them where they were wronged. As noted that Maytas was owned and even managed by his close family. He then had a plan which was able to finance the deal; he planned to raise debt money from the market. The money which was to be built was to be used in Satyam through the hand of Maytas and this debt which is created was supposed to be paid back not in the short term but also a long time. There of the cover-up. The whole letter was set up to soften the big blow to the company and also include himself in the disaster of the problem. 6. What characteristics of the board of directors play a role in preventing financial statement fraud? The board of directors has to monitor all the ethical policies and how are being maintained in the company. They were accountable on any financial report which is printed to the public. All board of directors should be active. Defined responsibilities of directors and the employees. 7. Do you think that making regulatory changes would help in preventing such fraud? The company management should ensure that the audit staff prevents or control any financial fraud occurring. The duties of the external auditors should be defined. Management comes up with policies which will help control the risk occurring. The inclusion of audit committee to monitor internal auditors.
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Read the Case: Governance Failure. After reading the case, answer the following questions as comprehensive as possible. (Make sure you answer all questions. Also, make sure you will use numbered sections to visually separate your answers from one another.)
1. Discuss the circumstances under which Saty’s fraud was exposed. What do you think were the reasons for the fraud? Could this have been prevented?
2. Examine the role of internal controls in the prevention of fraud.
3. Critically evaluate (e.g., strengths and weaknesses of) the corporate governance mechanisms adopted by Saty.
4. Assess the responsibility of audit committees as well as internal and statutory auditors in relation to Saty’s scandal. What are the lessons learned from this case?
5. Evaluate the statements made by the chairman in his resignation.
6. What characteristics of the board of directors play a role in preventing financial statement fraud?
7. Do you think that making regulatory changes would help in preventing such fraud?

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