The boss of Satyam, India's fourth-biggest software firm, has quit after revealing false accounts including some $1bn (£663m) in fictitious reserves.
Chairman Ramalinga Raju apologised and said "the gap in the balance sheet has arisen purely on account of inflated profits" during several years.
He said he was subjecting himself to the laws of the land and would "face the consequences".
India's benchmark index fell nearly 7% on the news, as Satyam stock shed 82%.
In a letter to the board of directors, Mr Raju said that neither he nor the managing director took any money from the company and did not benefit in financial terms following the "inflated results".
He added that no board member had been aware of the situation the firm was in.
"What started as a marginal gap between actual operating profits and the one reflected in the books of accounts continued to grow over the years," said Mr Ramalinga's statement, which was sent to the stock exchange.
"It was like riding a tiger, not knowing how to get off without being eaten," he said.
Satyam specialises in business software and benefited from the IT outsourcing boom.
"We have to go beyond this letter and find out what actually has happened," the Securities and Exchange Board of India told reporters.
"This is an issue which has very serious implications... It also raises the issue of authenticity of accounts that have been audited and certified by the auditors."
The news comes after plans to acquire Maytas Properties and plans to acquire a 51% stake in Maytas Infra failed.
"The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones," said the letter.
Mr Raju said a task force investigating the failed deal had been set up. He also recommended to the board that Merrill Lynch be entrusted with the talk of "quickly exploring" merger opportunities.
I actually saw a fax transcript of the entire letter to the board that I stumbled upon through my colleague Alfred. The faxed transcript has those quoted passages mentioned below and it did say that it is highly believed to be an insider's job that caused the mess. However, I do not have the exact thing to reproduce here.
Satyam is ranked number 4 of all the IT firms in India according to a top business magazine in India as of at the end of last year. My firm was ranked 28th overall. This is largely due to the workforce amount - 53 thousand in 63 countries.