Enron Scandal: Corporate Governance and Sarbanes Oxley Act, 2002

Business law and
ethics

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Enron scandal. ............................................................................................................................3
Corporate governance.................................................................................................................6
Sarbanes Oxley Act, 2002...........................................................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Ethical corporate governance means the policies and processes that company places to
deal with any issue that concern the conduct and administration of day to day operations of the
business. The company's main objective is to earn profit and it must ensure that it shall not
possess any unethical behaviour to achieve its goal (Brandt, 2018). This report is based on Enron
fraud scandal, committed in 2001 which became the most famed accounting scandal till date
now. After the scandal, there came a need to enact a law known as Sarbanes- Oxley Act,2002
which aimed to protect the investors through proper disclosure of accounts in a reliable and
accurate manner.
TASK 1
Enron scandal.
The Enron scandal is a series of events that has resulted in bankruptcy of US energy,
commodities and services dealt by Enron Corporation with a de facto dissolution of one of the
largest companies of auditing and accounting namely,Arthur Anderson LLP. The scandal took
place in 2001 which has more than $60 billion assets. This gave an alarm to the US legislatures
to improve the accounting standards for the companies.
History of Enron Corporation
Enron Corporation was founded by Kenneth Lay in 1985 with the merger of two
companies dealing in natural gas transmission, namely InterNorth INC and Houston Natural Gas
Corporation which were renamed as Enron. Kenneth Lay acquired huge debts and started
looking at different strategies to earn high profits. In 1990, Jeffrey Skilling was appointed and
was assigned a project for which an executive staff was developed by him who were successful
in hiding the million dollars debt of Enron by using accounting loopholes and poor financial
reporting (Kalinowski, 2018). From 1996-2001, Enron corporation was named as 'America's
Most Innovative Company” for its business model.
Timeline of scandal
During the establishment of Enron, the natural gas and electricity was under the state
monopoly but it started trading online when the government announced deregulation of energy
market as it was free from government of USA scrutiny. Then subsequently Enron launched the
first online trading website with a name EnronOnline in 1999. The company even invested in