The Oxford dictionary states that fraud is the “wrongful or criminal deception intended to result in financial or personal gain” (Oxford University Press, 2014). It is arguable that only individuals have the ability to engage in fraud, but these individuals may lead corporations, which allows corporations also to commit acts of fraud. From a high-level perspective for combating this issue, many governments build a regulatory environment that interacts through firms and individuals. This regulatory environment exists as a series of laws and directives on the various government entities interact to ensure this protection. These laws and directives protect the public from fraud. This coverage of the regulatory environment even protects the public from fraud that happens within a corporation. Laws, such as the Sarbanes-Oxley act of 2002 give protection against internal fraud. Understanding the effects of regulation on ethical behavior, and understanding the regulatory environment, ensures that one possesses a basic understanding of how the regulatory environment protects the public.
Effects of Regulations on Ethical Behavior
What is Ethical Behavior
"Ethics refers to the well-founded standard of right and wrong that prescribed what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues” (Velasquez, Andre, Shanks, S.J., & Meyer, 2010, para. 9). A working definition of behavior is the cognitive or physical actions of the individual. Combining ethics with behavior creates ethical behavior that has the working definition of the actions that one should take in light of a standard agreement of what the group defines as right or wrong.
Understanding the Effects on Ethical Behavior
All individuals will feel the effects of regulations on their ethical behavior. In License to Cheat: Voluntary Regulations and Ethical Behavior, one learns that there is a correlation between those who will commit unethical behaviors and those not wishing to exist under regulations. One also finds that voluntary control may give rise to unethical behavior, this is also true in comparison to the amount unethical behavior seen when no voluntary regulations were in existence (Gino, Krupka, & Weber, 2012). One should also note that not all acts of unethical behavior is a cause of greed, but may exist because of competition (Shleifer, 414), especially in the presence of an unfair environment (Gino, Krupka, & Weber, 2012). Some individuals may even suffer from a form of ethical blindness. Depending on factors leading to the decision that is in the making, one may find themselves unable to see the moral ramification of their actions (Palazzo, Krings, & Hoffrage, 2012).
Understanding the Regulatory Environment
Members in Charge of Regulatory Environment
One must note that the regulatory environment exists in two different directions: internally created, and externally created. Internally created...