Enron Fraud Scandal: Corporate Governance and Sarbane Oxley Act 2002

ENRON FRAUD
SCANDAL

Table of Contents
Introduction......................................................................................................................................3
MAIN BODY..................................................................................................................................3
Enron Scandal..............................................................................................................................3
Corporate Governance.................................................................................................................4
Sarbane Oxley act 2002...............................................................................................................5
Conclusion.......................................................................................................................................7
REFERENCES................................................................................................................................9

Introduction
Enron Corporation was a company which was formed in 1985 and has a merger with Houston
natural gas company and Omaha based Internorth incorporation. Enron was specifically known
for its innovation as it created electronic trading website and also focused on various
commodities. However Enron was included in an accounting scandal in 2001. This led to
bankruptcy of the company and also dissolution of Arthur Anderson which was one of the largest
audit and accountancy partnership throughout the world (Mutuku, 2018). The following report
discusses various issues of corporate governance and SOX 2002 which was an act formed after
the fraudulent activities conducted by public corporations. The principal areas of this act
consisted of corporate responsibility, increase in criminal punishment for companies who are
continuing to act fraudulent, accounting regulations as well as various new protections for the
companies. Various discussions on how corporate governance could have been used in Enron in
order to avoid the bankruptcy of the company and fraudulent activities conducted in the company
have been discussed (Cigler, 2004). Along with this the report also discusses about the act
Sarbane-Oxley. The reason for formation of the act along with various critics who stood against
the act are discussed in detail.
MAIN BODY
Enron Scandal
Enron Corporation was an American energy, commodities and services based in Texas. It
was founded by Kenneth Lay in 1985 (McCarthy and Puffer, 2002). It ruled the industry of
natural gas, communications and paper. It had a big staff base of nearly 20000 staff and also was
generating huge revenues during 2000’s. It was also awarded as America’s most innovative
company for number of years. During 2001, there was sudden news revealing about fraud of
irregular accounting procedures which involved Enron and its accounting company Arthur
Anderson. Former suffered largest bankruptcy in whole of history. The main highlights of
scandal are:
 Inflated assets and profits those were actually unexciting.