Role of Forensic Audit in Controlling Financial Statement Fraud: A case study of Satyam Computers

Abstract

A large number of fraud cases world over has caught the attention of stakeholders in companies mainly, the investors, as this is affecting their returns on investments. This also makes seriousnegative impact on existence of the company alongwith its market value.It has been observed that  more than $900 billion of market capitalizationof 30 high-profile financial scandals world over has been lost due to fraud from 1997 to 2004.(Bhasin2013).  Many Financial statementfrauds in large companies of early 2000s,  like Enron, WorldCom, Tyco, Parmalat, Adelphia , Satyam got attention world over and importance of Forensic Audit  in controlling these scandals was acknowledged. Role of Forensic Auditors is important in handling fraudulent financial reporting (Bhasin 2013). There is a need for Forensic auditor in the company to trace fraud committed by staffs and management who take advantage of weak internal control. (Bhasin2007). They apply new system of investigative accountancy to find frauds in companies’ accounts.Owojori,A.A.; T.O. Asaolu (2009). According to Owojori (2009),they  apply the techniques of verification, auditing and accountancy in examining frauds. The promoter of Satyam Computers committed Financial statement Fraud by inflating Financial figures to show better results and impress the stakeholders with robust financial health of the company. Forensic Audit gained importance as a profession among Indian Corporate after its submission of report on Financial statement fraud committed by Satyam Computers.. This paper studies importance of Forensic audit in handling financial statement fraud committed by promoters of Satyam computers.