Business Law and Ethics: Enron Fraud Scandal and Sabane-Oxley Act of 2002

This report discusses the Enron fraud scandal in relation to ethical corporate governance and the Sabane-Oxley Act of 2002. It explores the importance of business law and ethics in ensuring proper conduct and desired outcomes in an organization.

Business Law and
Ethics

Table of Contents
INDIVIDUAL REPORT.................................................................................................................2
Introduction............................................................................................................................2
Discuss this case in relation to ethical corporate governance and the Sabance-Oxley Act of
2002........................................................................................................................................2
Conclusion..............................................................................................................................5
REFERENCES................................................................................................................................6

INDIVIDUAL REPORT
Introduction
Business law and ethics are important part of an organisation as they ensure that activities
will conduct in proper manner as well as help in gaining desired outcomes (McLean, 2017). This
report is based on Enron company and it will going to focus toward Fraud Scandal where
Sabane-Oxley Act 2002 will be also considered in it.
Discuss this case in relation to ethical corporate governance and the Sabance-Oxley Act of 2002
Enron corporation case scenario – Ending of 2001, it was determine that Enron's
company financial condition was reported sustained through an institutionalised systemic in
which major frauds identified related to accounting.
Ethical corporate governance – It is the procedure which assist in ensuring that any
entity working within specific manner that result in balance within economical and factors will
maintain. Along with this, any corporate sector organisation have to take numerous decisions but
at same time it is important to ensure that they should not create issues for public or any other
sector (Thompson, 2017). Furthermore, ethical corporate governance express that when an
organisation utilise existing resources will not result in creating issues for general public. Ethical
corporate governance is important because it simply mean that corporate governance has its wide
importance within accomplishment of desired targets. At same time it is important that business
activity must have yo be conducted within ethical way but in case organisation get fail in
particular area then numerous penalties can impose.
Sabane-Oxley Act of 2002 – In given scenario, investor want to invest their money
within commercial activity so that appropriate results can be gained. Within same duration, there
are numerous business firm that presents fraudulent data in front of public and result in creating
wide issues. Thus, for controlling all the activities in appropriate manner, Sabane-Oxley Act,
2000 commenced. This act ensure that no organisation can present face data or information in-
front of stakeholders. Moreover, within an organisation these are several accounting information
in which it is important to present that within fair and appropriate manner. In this, it is important
according to the act proper audit has to be for account which is prepared. Main purpose of
conducting audit is to ensure that each and every information has been prepared within fair
manner (Cortez, 2018). Along with this, main purpose behind commencing this act is to make

sure that any corporate sector company will not breach law as well as try to collect information
related to scandal that has been conducted in any business firm. In addition to this, there are
several other need of legislation which make sure that each and every record organisation
maintained through performing commercial activities. If in situation an business firm get fail to
comply with regulations then penalty will imposed on them.
There are several business firms which conducted such scandal in past years and these
result in creating several issues for stakeholders. Moreover, main motive for commencing
Sabane-Oxley Act, 2002 is Enron Corporation because they had conduct one of the major
scandals within Corporate Sector that is related to fraudulent accounting statements (Hall and et.
al, 2018). In this case, financial report as well as accounting statements that presented through an
business firm was false in nature and result in negative impact on stakeholders. Due to false
accounting statement investors of company suffer loss of $74 billion. After conducting this
scandal business firm was categorised within bankrupt which comes under top 10 biggest fraud
related to corruption. Respective scandal is big in nature that staff of company has lost their jobs
without receiving salary. In this case defaulter was punished by sentence for 24 years.
Discussion of the case in terms of Corporate Governance and ethics
It is important to understand that Corporate governance and ethics have their wide
importance for an organisation and in these cases management of company was trying to
enhance advantages (MCLAUGHLIN, 2018). Profit of company will enhance through raising
funds from investors as well as inappropriate information was presented by company which is
unethical. The false information which company present will help them in grabbing attention of
numerous investors towards them. Corporate governance suggest that organisation will be able to
present true information about company to their investors. In an entity it is responsibilities of
higher authority that they must have to review decision taken through distinct division of
company. But in relation of case scenario, management not take responsibility because it result
in enhancing burden for them as well as debt will also increase.
According to the ethical values, it is essential for Enron Corporation that they have to
consider their staff as well as other stakeholders before getting involved in any scandals. In
addition to this, scandal was wide in nature that business firm was not able to conduct business
activities in future once it will providing that entity was not ethical in relation of performing
business activities. Thus, terms and condition that create numerous issues for several

stakeholders was breach (Bu, 2019). Whereas, corporate governance will discuss that business
firm is only able to take such decisions that are advantageous for public and investors who play
important role in company. Main reason behind all these issues is high level risk taking
capabilities of company.
Discussion of the case in terms of Sabane-Oxley Act, 2002.
This law was introduced after going through scandal that conducted by Enron
Corporation. Respective act say that business activities that conducted through Enron corporation
was not in favour of law and policies (NOBLE, 2019). According to the act is is important that
company should have to prepare appropriate accounting statements but respective company was
not able to do that. In addition to this, it is important that appropriate audit has to be done but at
same time it was founded that Enron Corporation was not working as per the law and lack of
audit result in creating big scandal by management of company. Moreover, main reason in
relation of forming accounting statements is to make sure that stakeholder can determine
situation of entity by that they will able to take decision that company is appropriate for
investment or not (Madden, 2019). Thus, it is important for an business firm to make fair
accounting standards because in future wrong statements will result in negative impact on
working of business firm. The commencement of law has defined the roles and responsibility of
every accountant within the company. Even responsibility of every auditor in the company has
redefined but at the same time, auditor of the company didn’t perform their duty as they didn’t
try to show the accurate picture of the entity. If similar form of problem will occur against then
auditor of the company will have to face number of problem as they will be also held liable for
the default. In addition to this, scandal was wide in nature that business firm was not able to
conduct business activities in future once it will providing that entity was not ethical in relation
of performing business activities. Thus, terms and condition that create numerous issues for
several stakeholders was breach. Whereas, corporate governance will discuss that business firm
is only able to take such decisions that are advantageous for public and investors who play
important role in company. Main reason behind all these issues is high level risk taking
capabilities of company.
Conclusion
Business law is important is dealing with any commercial activities. Although, Sabane-
Oxley Act 2002 is appropriate law in nature because it make sure that all of accounts as well as

business transactions are shown according to the need of law. In addition to this, it is important
for an business firm to prepare accounting statements by using fair information in effective
manner. Because wrong statements will result in negative impact on brand vale in market as well
as legal actions will be taken by government bodies in relation of same.

REFERENCES
Books and Journals
McLean, S. ed., 2017. Medical law and ethics. Routledge.
Thompson, D. B., 2017. Teaching the Business Law and Ethics of Arbitration After
Concepcion. Journal of Legal Studies Education, 34(1), pp.63-88.
Cortez, N., 2018. The Evolving Law and Ethics of Digital Health. In Digital Health (pp. 249-
269). Springer, Cham.
Hall, M. A. and et. al, 2018. Health care law and ethics. Wolters Kluwer Law & Business.
MCLAUGHLIN, J., 2018. LAW, BUSINESS & ETHICS.
Bu, Q., 2019. Reassess the law and ethics of heritable genome editing interventions: Lessons for
China and the world. Issues L. & Med., 34, p.115.
Madden, T. M., 2019. Law and Strategy and Ethics. Geo. J. Legal Ethics, 32, p.181.
NOBLE, T., 2019. JOURNAL OF LAW, BUSINESS & ETHICS.