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There Are Many More Satyams Out There

two things:
first, leverage has absolutely NOTHING to do with the Satyam fraud. Balance sheet leverage derives only from debt (or perhaps off balance sheet debt) or contingent liabilities (contract leverage). Satyam had neither. (BTW AIG's leverage was contract leverage--large batches of CDSs that represented very low $ liabilities until suddenly one day they all kicked in and represented very high $ liabilities--kind of like an insurer who has no claims to pay until the day after a hurricane when they suddenly incur massive claims.) Again, from everything I have heard, Satyam had neither debt nor any contingent liabilities that suddenly exploded on them.
Second, Indian authorities arrested two of PWC's auditors on the Satyam account a couple of days ago.
Rakesh, with all due respect, you should consider taking an accounting course to insure that you better understand financial statements. The cash issue that I raised has nothing to do with leverage and it has nothing to do with some of the cash flow and operating margin items you suggest. Cash itself and the entire balance sheet represent snapshots of the financial condition at a given moment in time--say 11:59 PM on December 31. At that moment, Satyam either had $x of cash in such-and-such a bank or it did not. Similarly, either they owed someone or they did not. Valuing inventories and receivables and most other items can be open to negotiations (how much is last year's undeployed personal computer actually worth in inventory.) But cash should not be open to any interpretation. The value of a contingent liability may be--such as the AIG CDSs. Someone either never checked to see whether cash assets were real or someone actually helped management perpetrate this--the arrests seem to suggest the latter. "Cash flows" and operating margins both represent "flows" or movement of funds over periods of time--quarters or years, not balance sheet snapshots.

There Are Many More Satyams Out There

Rakesh,
As a retired investment analyst with over 25 years of experience and as a retired manager of a tech fund, I think you understated the fraud involved at SAY.
I have always used cash flow as the ultimate measure--it is far far more difficult to cheat on cash flow than on the income statement (virtually everybody embellishes the P+L). But SAY was EXTREME. How could they possibly have made the two largest single items on their balance sheet (from the 20-F filed 8/8/2008 at sec.gov--cash and investments in bank deposits) look so much larger than they actually were. Your assertion that they finagled with accounts payable (only $32 million compared to $290 million in cash) seems unlikely--this suggests that they had cash because they didn't pay vendors $300 million but they somehow made the $300 million of payables disappear?? Maybe they withheld pay to their employees (at least accrued expenses shows as $238 million) but this still seems unlikely. And how could they possibly show investments in bank deposits at $826 million?? This dwarfs every other number on the balance sheet.
I don't mean this to be critical of you (or your article), but I do mean this to seriously question whether you are anywhere near explaining what happened at SAY. (PS I do not and did not have any economic interest in SAY, but having looked at the company, I have an intense intellectual interest in how they perpetrated this.)
I suspect that some parties at PWC probably were involved in a major way. I would be very interested in any info you have on that topic and how the big auditors interface with clients in developing countries.
Thanks