Analyzing Enron's Case in Relation to Ethical Corporate Governance and Sarbanes-Oxley Act, 2002

Individual Report

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Analysing the Enron;'s case in relation to ethical corporate governance and Sabane Oxley Act,
2002.............................................................................................................................................3
Enactment of Sabanes Oxley Act 2002.......................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The accounting scandals have a huge implication over the reputation and brand image of
the company and also results into bankruptcy of the same. In this report, the most famous
accounting scandal of Enron is studied from the perspective of corporate governance along with
the Sabane-Oxley Act of 2002. Enron is basically the American based energy company in Texas.
This study also involves the dissolution of the Arthur Andersen as one of the top 5 largest audit
firm.
MAIN BODY
Analysing the Enron;'s case in relation to ethical corporate governance and Sabane Oxley Act,
2002
Corporate governance is basically the set of policies and the procedures which provides guidance
to the organization's BOD in respect to managing the business operations and functioning of it in
a proper way. It is based upon the principles such as transparency, security and accountability.
The Enron scandal has resulted into being one of the largest bankruptcy in America
which also lead to become the biggest audit failure. Before, it become bankrupt, its total revenue
was $100 bn in the year 2000. At the ending of the year 2001, it was identified that the financial
condition of the organization is sustained by way of institutionalized and creative account fraud
(Awolowo and et.al., 2018). The stock price of Enron was $90 in mid of 2000 and which further
reduced to less than $1 towards the end of 2001 which resulted into causing the shareholders lose
approximately $11 billion. Enron then revised its annual statements for the last 5 years which
revealed that the company has a loss of $586 mn which resulted into falling of Enron in 2001.
The main causes behind bankruptcy of the company are stated below.
Truthfulness: It refers to the lack of truthfulness among the management in regard to the
health of the organization. The senior management of the company were of the view that Enron
has to best in all it does for which it required to protect its reputation (Akyol, 2020). There was
no evidence in regard to the CEO told its employees that the stock price would rise or made any
disclosure pertaining to the selling of stock. After the investigation, It was learned that the CEO
sell off before 2002 and which was sold to pay off the amount owed by CEO to Enron. This sale
of stock is considered as an exception in the ordinary director and this is not required to be
reported until 45 days have lapsed after the ending of the organization's fiscal year.