It Industry and Fraud ; the Satyam Fraud May Seem Just an Isolated Case but Thanks to the It and Ites Sector's Unique Characteristics, There Is Enough to Suggest Room for More Frauds. Here Is a Quick Checklist.

Summary

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Recession. Slowdown. Companies across sectors praying for customers. Contrast that with information technology and business process outsourcing firms, where customer count was always a recurrent boast. Before Satyam, that is: investigators into the Satyam scam are now trying to find out, among other things, if the IT major at all had the large customer base it used to claim before promoter B. Ramalinga Raju was caught with his hand in the till.

Among the other things Satyam inflated or is suspected to have inflated: earnings and employee headcount. For the authorities, regulators, investors and industry brethren, the Satyam case has raised a red flag over the entire IT industry and its numbers. The nature of their products make physical verification almost impossible. Conventional methods are more geared to checking how many tables, chairs and equipment exist and not for an equivalent audit of, say, how many customers it has, who they are and what their order size is.

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Extract

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It Industry and Fraud ; the Satyam Fraud May Seem Just an Isolated Case but Thanks to the It and Ites Sector's Unique Characteristics, There Is Enough to Suggest Room for More Frauds. Here Is a Quick Checklist.

Observers feel that IT companies and their auditors need to devise foolproof ways to measure customers, employee numbers and orders/ sales, even though industry insiders say this is a time- consuming job in a sector traditionally in a hurry to declare quarterly results. The trade-off is between doing things thoroughly and doing things quickly. Apart from land in the Indian context, people form the asset base of an IT comp...

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