Project 2: Analysis of Enron's Scandal, Corporate Governance, SOX Act

This project delves into the Enron Corporation scandal, a significant case of accounting fraud and ethical violations. The assignment examines the scandal in the context of corporate governance ethics, highlighting the failure of Enron's management to adhere to ethical standards and prioritize stakeholder interests. It analyzes the implications of the scandal and its impact on the business environment. The project also discusses the role of the Sarbanes-Oxley Act of 2002 (SOX) in preventing and detecting accounting fraud, emphasizing the importance of regulatory oversight and corporate accountability. The analysis covers the act's provisions, the penalties for non-compliance, and its impact on accounting practices and financial reporting. The project concludes by emphasizing the crucial role of ethical corporate governance and the importance of adhering to the SOX Act to ensure fair and transparent business practices. The project also includes an introduction, a conclusion, and a references section to support the analysis. The assignment provides a comprehensive understanding of the Enron scandal's implications and the importance of ethical behavior and regulatory compliance in the corporate world.

PROJECT 2 (Business Law & Ethics)

Table of Contents
INTRODUCTION...........................................................................................................................................3
PROJECT 2....................................................................................................................................................3
Discuss this case in relation to ethical corporate governance and the Sabane-Oxley Act of 2002..........3
CONCLUSION...............................................................................................................................................6
REFERENCES................................................................................................................................................7

INTRODUCTION
There is a business law which has been enforced to overview each of the activity that are
performed on a daily basis within commercial sector. Any of the activity requires decision
making process and that is only possible if law and regulations are followed and at the same
time, it is required that while following law, ethical value are also needed to be considered as
working according to society and environment is equally important. As per above mentioned
discussion, ethical values are equally important so that one of the popular case will be explained
in the aspects of corporate governance ethics and Sabane-Oxley Act.
PROJECT 2
Discuss this case in relation to ethical corporate governance and the
Sabane-Oxley Act of 2002.
CASE SCENARIO: Enron Corporation – “At the end of 2001, it was revealed that
Enron's reported financial condition was sustained by an institutionalised, systemic and
creatively planned accounting fraud”.
Corporate Governance Ethics: It is the concept for commercial sector that states that
performing business activity is mandatory but at the same time it is essential that those activity
should be performed in a fair manner. Discussing it in detail, it is among one of those concepts
which tells that performing any of any of the business activity is not easy because there are lots
of criteria that needs to be fulfilled (Barber, 2016). It is essential to understand from the corporate
governance ethics point of view that each of the activity needs to be performed in the aspects of
environment. It means that any of the business decision should not affect any of the person or
party who has a connection with company as it may create huge issues for the business entity. In
detail, several decisions are being made, and all of those decision should be taken on the basis of
law and ethics and company should understand that criteria of both the law should be met else
penalty can be imposed. In other words, it is mandatory for any of the entity to work according to
the guidelines of corporate governance and they must not fail in meeting out the guidelines else
problem may raise for them.

Sabane-Oxley Act, 2002: The law which governs the activity of commercial sector is
known as Sabane-Oxley Act, 2002. It is among the act which has shown its importance in recent
time period because it has made compulsory for the organisation to follow law and policies in
each and every aspect. The formation of Sabane-Oxley Act has made easy to identify about the
accounting fraud which are being performed in recent time period. In simple words, this act do
not allows any of the organisation to perform any of the fraud which is related to accounts as
strict law and policies has been formed (McGowan and Buttrick, 2015). In addition to this, it has
made easy for the stakeholders of the company to identify that whether they should continue the
business relation or not. It is because false accounting statement can create problem for their
investment and reputation both. The different types of penalties are there which means that strict
action can be taken against the defaulter due to which huge problem can be created for the
organisation. Also, several roles and responsibility has been given to the accounting department
and auditors of the company which means that chances of fraudulent activity will reduce
significantly in it. This are some of the major benefit that can be seen within the case
Detail discussion of the case
The case of Enron Corporation is one of the top scandals till the date that has taken place.
In this case, the major defaulter was the management of a company who didn’t perform the duty
which has been delegated to them. It means that there were some of the fraudulent activity
performed by accountants and auditors to whom management had also supported. The main
reason behind was to raise higher amount of fund as company was struggling in the market but
false information was presented in the case by showing higher revenue and profits in the balance
sheet. The scandal was of around $7 billion where company also used the pension fund of
employees but not depositing the amount in their respective accounts. The accountants has made
the fraud due to which employees of the company has to lose their job and the result was
announced that company was declared as a bankrupt.
Discussion of the case in form of Corporate Governance Ethics
The corporate governance ethics and the case of Enron Corporation is completely seen in
opposite direction which means that there were not a single terms and condition which was
followed as per the requirement. Talking about the case in detail, it was found that any of the
ethical terms and condition were not followed in this case as huge fraud was made by the

management (Tsalikis and Fritzsche, 2013). The corporate governance ethics stats all of the
decision by the organisation should be taken in the favour of public or the stakeholders who are
connected with the organisation but this was completely missing in the case because there was
no any positive sign that was found within the case. On the other side, it is the duty of corporate
sector that they should be able to provide several benefits to the employees but company like
Enron corporation just thought about their person benefit and they had taken the benefit from it
by using their personal fund that is to be given to employee after their retirement. The guidelines
of corporate governance ethics explain that fair decision should be taken where each of the
activity which is being performed should be reviewed so that there will be limited chances of
occurrence of fraud. But, any of the management level person in Enron Corporation didn’t tried
or even performed their part of work. All of this mentioned point was the main reason due to
which problem in Enron Corporation has created.
Discussion of the case in form of Sabane-Oxley Act, 2002
The act and the case are the two different things in this particular case because it was
found that accountants of the company were not able to perform their part of work which they
should have performed. The Sabane-Oxley Act, 2002 explains that accountant and the auditor
have a huge responsibility in the organisation where they should be able to present the accurate
statement and information. But, auditor of Enron Corporation has failed to do so because it was
found that both auditor and accountant combinedly tried to present false data which forced the
investor to invest higher amount of money within the organisation (Ghahramani, 2015). There
are other important guidelines of the act but all of them relates with accounting activity and in
addition to the responsible department in the act. The act has state that number of times audit
should be done in the organisation but Enron corporation had not done and if any of the default
will be found after the audit, then auditor will be also responsible for the mistake that has been
performed.
Overall, there are different types of guidelines that has been introduced by the act which means
any of the entity will not get the right to take any of those action due to which people has to
suffer from any of the problem (Hoffman, Frederick and Schwartz, 2014). Discussing it in detail,
all of the investor or stakeholders will have the detail information about the company that how it

is performing and what are the essential terms and condition which it is following. These
guidelines will allow any of the investor to take positive decision.
CONCLUSION
It is said that corporate governance ethics and Sabana-Oxley act 2002 is crucial as it
made mandatory rule under which fair accounting statements must be presented in front of the
stakeholders. It’s guidelines can be effective in making any of the decision which are favourable
for stakeholders of the company.

REFERENCES
Books & Journals
Barber, C., 2016. Healthcare law and ethics, 1: a general introduction. British Journal of
Healthcare Assistants, 10(2), pp.84-87.
McGowan, R. J. and Buttrick, H. G., 2015. Moral Responsibility and Legal Liability, or, Ethics
Drives the Law. Journal of Learning in Higher Education, 11(2), pp.9-13.
Schafer, B. and et. al., 2015. A fourth law of robotics? Copyright and the law and ethics of
machine co-production. Artificial Intelligence and Law, 23(3), pp.217-240.
Tsalikis, J. and Fritzsche, D. J., 2013. Business ethics: A literature review with a focus on
marketing ethics. In Citation Classics from the Journal of Business Ethics (pp. 337-
404). Springer, Dordrecht.
Ghahramani, S., 2015. Professors as Corporate Fiduciaries: Implications for Law, Organizational
Ethics, and Public Policy. Va. L. & Bus. Rev., 10, p.237.
Sulkowski, A. J., 2017. Rodolfo's Casa Caribe in Cuba: Business, Law, and Ethics of Investing
in a Start‐up in Havana. Journal of Legal Studies Education, 34(1), pp.127-162.