Briefly Describe The Entrepreneurial Crime You Researched

Briefly Describe The Entrepreneurial Crime You Researched

Briefly describe the entrepreneurial crime you researched. Discuss how the psychological characteristics of individuals and accounting opportunities for omission(s) may have contributed to the commission of the entrepreneurial crime you researched. Analyze the cost of Sarbanes-Oxley in regulating the white-collar crime you researched and evaluate its impact on the “free market.” Compare and contrast the adjudication of the white-collar crime you researched as a criminal action versus a civil action. Determine whether agencies that are vested with statutory powers of investigation and imposition of penalties should choose a non-adversarial approach to regulation, as well as how your determination would have impacted the crime you researched. Use at least three (3) quality references. Note: Wikipedia and other Websites do not qualify as academic resources.

Paper For Above instruction

The entrepreneurial crime selected for discussion is financial statement fraud within small enterprises. This type of white-collar crime involves deliberate manipulation of financial reports to deceive stakeholders, often driven by personal financial pressures or a desire to meet market expectations. In understanding the psychological traits of perpetrators, research indicates traits such as greed, unethical decision-making tendencies, and a perception of impunity often prevail. These individuals may also possess cognitive biases that justify dishonesty, such as rationalization or perceived lack of oversight. Additionally, accounting opportunities for omission—such as inadequate internal controls or lax regulatory environments—facilitate the commission of such crimes by providing avenues to conceal fraudulent activities (Albrecht et al., 2021).

The motivations behind financial statement fraud include personal gains like increased stock prices, bonuses, or bailout funds. These motivations are compounded by psychological factors, including risk-taking propensity, overconfidence, and an inability to resist pressure to meet financial targets. The entrepreneurial context, often marked by high growth ambitions and limited oversight, creates a fertile ground for such offenses. Perpetrators leverage accounting opportunities for omission, such as understated liabilities or unrecorded expenses, to artificially inflate financial health indicators (Crane et al., 2019). These opportunities often arise from weak corporate governance and oversight lapses, enabling individuals with psychological predispositions to commit fraud with reduced risk of detection.

The Sarbanes-Oxley Act (SOX), enacted in 2002, aimed to curb corporate fraud and increase transparency, thereby imposing strict regulatory standards on companies. The costs of SOX compliance are significant; they include increased expenses for internal controls, external audits, and governance processes. Critics argue that these costs can burden smaller companies disproportionately, potentially stifling innovation and entrepreneurial activities due to resource diversion (Coates, 2020). Conversely, supporters contend that SOX has enhanced investor confidence by establishing accountability and reducing fraudulent financial reporting, thus safeguarding the integrity of capital markets.

Examining the adjudication of this white-collar crime reveals contrasting approaches—criminal versus civil proceedings. Criminal actions are pursued when fraud is intentional and egregious, resulting in penalties such as fines, sanctions, or imprisonment. Civil actions, on the other hand, typically seek restitution or penalties designed to rectify damage without criminal sentencing. While criminal prosecutions serve a punitive role, civil proceedings tend to focus on compensation and deterrence (Revsin, 2018). The choice between these avenues hinges on the severity and motives behind the misconduct and impacts the defendant’s rights and due process considerations.

Regarding regulatory approaches, agencies with statutory powers of investigation and penalty enforcement could benefit from adopting a non-adversarial approach. Such a strategy emphasizes collaboration, transparency, and preventative measures over punitive responses. A non-adversarial framework encourages entities to voluntarily disclose issues and cooperate in regulatory processes, potentially leading to more effective fraud prevention and early detection (Lamb et al., 2021). This approach might have mitigated the extent of financial statement fraud by fostering a culture of ethical compliance rather than fear of punitive retaliation, thus aligning regulatory efforts with entrepreneurial growth while maintaining market integrity.

In conclusion, entrepreneurial financial fraud is influenced by psychological traits and accounting opportunities, with regulatory measures like SOX playing a critical role in balancing oversight and market dynamism. The adjudication process and regulatory approaches significantly impact the deterrence and resolution of such crimes, underscoring the importance of adaptive and collaborative strategies in combating white-collar offenses.

References

• Albrecht, W. S., Albrecht, C. C., Albrecht, C. O., & Zimbelman, M. F. (2021). Fraud Examination (6th ed.). Cengage Learning.
• Crane, A., Matten, D., Glozer, S., & Spence, L. J. (2019). Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford University Press.
• Coates, J. C. (2020). The Impact of Sarbanes-Oxley on Small Businesses. Journal of Business & Technology Law, 15(2), 255-278.
• Lamb, C. S., Vázquez, A., & Hickman, M. (2021). Regulatory Strategies for Fraud Prevention: Non-Adversarial Approaches. Compliance & Ethics Journal, 18(3), 45-56.
• Revsin, P. (2018). White-Collar Crime and Civil Litigation. Law Review Journal, 32(4), 1023-1042.