A fraud is a white collar crime through which the perpetrator uses deception to gain financial gain or other malicious motives. Its a deliberate action or misrepresentation and it leads to huge financial loss to other people. There are various form of fraud which includes computer fraud and accounting fraud. Accounting fraud is misrepresentation of accounting figure and information so as to achieve a certain objective. Such objectives could be to make the firm look more profitable thus attracting investors. These inappropriate accounting are illegal and could lead to legal war. In order for a fraud to occur three elements have to be there. These elements are pressure, opportunity and rationalization. Pressure is what leads the person to committing the fraud. Opportunities are the conditions that allow the commitment of the fraud, while rationalization is the justifications given by the perpetrator. Fraud triangle can be used to analyze a fraud. It analyses the three elements.

Case study: Satyam accounting Fraud

Satyan Computer Company is an Indian outsourcing company that serves more than 500 companies. Satyam accounting fraud was revealed January 2009. At this Accounting fraud, Satyan is accused of having inflated its earnings and assets for many years. The chairman of the company admitted that the company had systematically manipulated its accounting figures. He admitted that 50.4 billion rupees ($1billion) worth assets listed was nonexistent. 27 billion rupee quarterly revenue reported was inflated by 20%. In addition the companies operating margin was a fraction of the margin reported (Timmons, p1). The fraud started as a small discrepancy in the accounting book about seven years ago. The fraud stared as a marginal gap between actual operating profit and the profit reflected in the books of account. This gap increased as the size of the company increased (Wassener p2). The accounting fraud aimed at deceiving the investor by indicating constant growth in the company. It also wanted to make the company competitive in the stock market. The fraud also was intended to create a good image before the eyes of the company’s clients (Timmon).


Analysis of the fraud using Fraud triangle


The management of Satyam wanted to appear in a state of continuous growth. The manipulation of accounting figure was aimed at deceiving the investor in the company that the company was in a state of profitability (Raju, p1). The management did not want to answer question on the declination of the company profitability. It also wanted to uphold the investor confidence thus attract good share prices in the stock market. Being an outsourcing company, Satyam was faced with high competition from other companies. The management wanted to maintain its market share by showing a state of stability. By showing a constant growth trend, its clients would have confidence with the company.


The fraud is said to be a deliberate manipulation by the management so as the company could look to be in a consistent growth. The top officials, thus, were aware and allowed the fraud to continue. Questions have been raised over India’s regulatory oversight over the company. The fraud had continued for such a long time as seven years. This shows weakness in the companies’ regulatory oversight in India (Timmon, p1). In addition, the accounting standard of India has been accused. The consistent growth shown in the books of accounts should have been questioned. The fraud continued for a long time without being revealed, with good accounting standards these discrepancies should have noted. There was also poor auditing. The auditing company may have been involved since the discrepancy in balance sheet was great. Weak regulatory oversight and poor accounting and auditing standard allowed the fraud to continue for seven years without being revealed.



The chairman of the company claims that the fraud started as a small gap between the actual profit and profit reflected in the books of account (Raju, p2). This marginal gap was not addressed but was covered. The chairman says that the gap expanded as the size of the company increased and became too big to be covered any longer.


White collar crime in form of fraud has been in the increase. Accounting fraud manipulates accounting figure in order to deceive. Accounting fraud can lead the investors to incur huge losses by investing in a company believing that it is doing well while it is not. As observed in Satyam Computer Company, the accounting discrepancy can not be hidden for ever. The long term effect is loss of business and legal battle. To control accounting fraud the opportunities for these crimes should be addressed. The regulatory oversight should be strengthened and accounting and auditing standards raised.


Timmons, Wassener (2009) World Business;-Satyam Chief admits Huge Fraud; New-York-Times Retrieved from 08satyam.html

Raju (2009) Satyam Chairman Letter to the Board of Directors;- Retrieved from http://media.ft.c om/cms/cab511e2-dc9d-11dd-a2a9-000077b07658.pdf