The significance and the necessity of ethics and law in the field of business have long been recognized owing to the increasing unethical practices that are adopted by the business organizations. It needs to be mentioned in this context that ethics as well as laws in the business world need to be followed for the reason of avoiding possible legal accusations or procedures. …
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The presence of the different forms of laws helps in establishing the minimum adequate and satisfactory norms relating to the conduct of behavior. The laws would help in ascertaining that the business organizations are operating in agreement with the laid down specifications so that the interests and the well being of the employees, the society, the environment, the country and the organization on the whole remain protected. This also gives rise to the need of comprehension of the subject matter of business ethics. It aids in making a distinction amid the right as well as the incorrect act. The law could be stated to be fundamentally a codification or rather an institutionalization of the ethical aspects into particular social regulations, legal guidelines and prohibitions. Therefore, the thesis statement for the paper is that legal issues in the present day business context certainly raise ethical concerns which in turn create a derogatory impact upon an organization’s sustainability in the long run. Analysis of a Legal Issue in the Business World The collapse of the company Enron and the downfall of its auditor Arthur Andersen could be cited as an instance with regard to the violation of legal issues along with unethical practices in the business world. ...
The auditor of the company Arthur Andersen was found to be involved with such illegal practices. The revelation of the corruption and the deliberate fraud proved fatal for both the company Enron as well as for Arthur Andersen. The company was compelled to announce itself to be a bankrupt and the subsistence of the ace auditing firm came to an end with the exposure of this scandal. The particular scandal was observed and analyzed to entail both unethical as well as illegal conducts (Healy & Palepu, 2003). The chief problem that arose for the company, Enron was to predict the market worth of its contracts, few of which were for a time period of as long as 20 years. The revenue was predicted or calculated on the base of the current worth of the net cash flows in the coming years. The other significant issue associated with these kinds of predictions was the practicability of the contracts and costs relevant to them. All these issues along with other accounting problems were faced by the company. These gave rise to accounting abnormalities and business malfunctions and ultimately led to the final breakdown of the company (Healy & Palepu, 2003). The Issue The business model of Enron was stated to be quite complicated as it involved a broad range of products from trading functions, physical assets as well as going beyond the national borders. All these factors extended the boundaries of accounting. Enron took the opportunity of exploiting these accounting boundaries to the maximum in controlling its revenues along with its balance sheet so as to depict a favorable performance scenario (Gupta, 2004). However, in this case two matters emerged out to be extremely problematic for the company. The company’s transactions related to trading engaged
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