Business Law and Ethics: Enron Scandal and Remedies

BUSINESS LAW AND
ETHICS-2

TABLE OF CONTENT
INTRODUCTION................................................................................................................................3
CONCLUSION....................................................................................................................................5
REFERENCES.....................................................................................................................................7

INTRODUCTION
Business laws are made by government to have control overall business operation so that no
harm can be caused to customers, employees and people that are living in society. Ethics are moral
values, principles and beliefs that are considered by particular individual and organizations while
performing its several functions. This report is based on a case study of company name as Enron
that has not undertaken ethical values or corporation policies that have adversely impacted on image
of firm in the market. So, the present essay discussed key point such as issue in Enron that have
contributed in scandal of fraud, Sarbanes-Oxley Act 2002 and remedies that can be taken by it in
order to grow and sustain in industry for longer time frame and retained customers trust.
Enron's fraud scandal is case related to business ethics as its executives does not honestly
and transparently show actual profit and loss that it has earned during particular financial years. It is
one of the enterprise that build homes for people to stay at affordable rates so that dream of various
individuals can be fulfilled. On October 2001, it was surfaced that seventh largest American
company have involved in accounting fraud and corporate corruption. As company by using “mark
to market” in order to make misused of special purpose entities and accounting fraud. Such as
company to attract stakeholders show less losses and higher sources of incomes therefore in short
cooked the books (Enron Scandal, 2017). The share of company was trading at high time $90.75 at
peak in mid of 2001 but suddenly value of share get low in November 2001. The firm was founded
to be the biggest audit failure and largest bankruptcy in American history. Many employees have
lost their jobs; shareholders have to bear loss of $74 because of bankruptcy of company thus this
scandal has negatively impacted on livelihood of each individuals. The major cause that have
contributed Enron case is financial issue as management has not disclosed true facts to public
investors. Therefore, after correct accounting statements it was found that 80% of profit has been
vanished by year of 2000 that have put questions on US system of regulatory system. As it has
caused loss to number of individuals that are interested in operation of business such as investors,
employees and customers.
There is certain key issue that have resulted in fraud scandal of Enron such as
mismanagement, ineffective consideration of ethical practices and moral values and auditing and
accounting issue. Management of Enron by following unethical practices to not to disclose the fact
related to actual loss faced by company have negatively impacted on growth and sustainability of
enterprise for longer time frame. Improper management of auditing and accounting have impacted
on trust and relationship of stakeholders or people that have invested their capital for growth and
success of firm (A view from the inside: How Enron went wrong, 2018). Therefore, overall the