Investigators reveal Satyam Fraud methodology
In my post dated 7 Jan 2009 titled “Satyam Fraud – Unravelling the Mystery” I had hazarded some guesses on the various ways how the fraud could have been committed and how the auditors could have unearthed such frauds.
Now, the Indian Investigators have revealed the modus operandi of the fraud (inflating revenues). Read below.
Indian investigators disclose how computer systems were subverted to generate false invoices
The Central Bureau of Investigation (CBI) of India has revealed details of the fake invoicing system used by Satyam Computer Services Ltd as part of the US$1 billion-plus fraud that has rocked the company.
Documents released to the general public in India showed how the company’s standard billing systems were subverted to generate ‘false invoices to show inflated sales,’ before its former boss Ramalinga Raju admitted his role in India’s largest ever corporate scandal.
The CBI said it had used cyberforensics to uncover how in-house computer systems were exploited to generate fake invoices.
Regular Satyam bills were created by a computer application called ‘Operational Real Time Management (OPTIMA)’, which creates and maintains information on company projects.
The ‘Satyam Project Repository (SRP)’ system then generates project IDs; there is also an ‘Ontime’ application for entering the hours worked by Satyam employees; and a ‘Project Bill Management System (PBMS)’ for billing. An ‘Invoice Management System (IMS)’ generated the final invoices.CBI officers have concluded that the scandal involved this system structure being bypassed by the abuse of an emergency ‘Excel Porting’ system, which allows ‘invoices [to] be generated directly in IMS…by porting the data into the IMS.’ This system was subverted by the creation of a user ID called ‘Super User’ with ‘the power to hide/unhide the invoices generated in IMS’.
By ‘logging in a Super User, the accused were hiding some of the invoices that were generated through Excel Porting. Once an invoice is hidden the same will not be visible to the other divisions within the company but will only be visible to the [company’s finance division sales team]‘ concluded the CBI.
The CBI said their inquiries revealed there are 7,561 invoices found hidden in the invoice management system, worth INDRupees 51 billion (US$1.01 billion).
As a result, ‘concerned business circles’ would not be aware of the invoices, which were ‘also not dispatched to the customers’. The note added: ‘Investigation revealed that all the invoices that were hidden using the Super User ID in the IMS server were found to be false and fabricated.’ The value of these fake invoices ‘were shown as receivables in the books of accounts of [Satyam] thereby dishonestly inflating the revenues of the company.’
And there were a lot of these bills. The CBI said their inquiries revealed there are 7,561 invoices found hidden in the invoice management system, worth INDRupees 51 billion (US$1.01 billion). ‘As a result of this analysis, the individuals who have generated and hidden these false and fabricated invoices have been identified,’ said the law enforcement agency.
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To find out the methodology they have taken 3 months. I dont know how many more months they will take to re-state the accounts and arrive at the exact fraud. These type of cases should be nailed quickly and the fraudsters should be punished. In our legal system there is a loophole in every possible section of the Act and hence the process is too long……..
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