The Applicability of a Contingent Factors Model to Accounting Ethics Research

This paper discusses the relevancy of a contingent factors model posited by Jones for conducting accounting ethics research. Using a sample of 37 experienced Australian auditing managers and partners of all of the ‘Big Four’ multinational accounting firms, we find that the contextual model developed by Jones can help guide accounting ethics research by isolating the contingent factors that affect ethical decision making. Moreover, we examine how the factors differ across different accounting settings. Implications for accounting ethics research and accounting practice are then discussed.Jeffrey R. Cohen, PhD is an Associate Professor at the Carroll School of management at Boston College. His research focuses primarily on behavioral ethics issues as well as investigating governance from a behavioral perspective.Nonna Martinov Bennie is a Senior Lecturer at Sydney University. Her research focuses on ethical issues in auditing as well as issues surrounding materiality judgments.     

Ethics and the Auditing Culture: Rethinking the Foundation of Accounting and Auditing

Although the foundation of financial accounting and auditing has traditionally been based upon a rule-based framework, the concept of a principle-based approach has been periodically advocated since being incorporated into the AICPA Code of Conduct in 1989. Recent high profile events indicate that the accountants and auditors involved have followed rule-based ethical perspectives and have failed to protect investors and stakeholders – resulting in a wave of scandals and charges of unethical conduct. In this paper we describe how the rule-based traditions of auditing became a convenient vehicle that perpetuated the unethical conduct of firms such as Enron and Arthur Andersen. We present a model of ten ethical perspectives and briefly describe how these ten ethical perspectives impact rule-based and principle-based ethical conduct for accountants and auditors. We conclude by identifying six specific suggestions that the accounting and auditing profession should consider to restore public trust and to improve the ethical conduct of accountants and auditors.     

Case Studies of Ethics Scandals: Effects on Ethical Perceptions of Finance Students

Ethics instructors often use cases to help students understand ethics within a corporate context, but we need to know more about the impact a case-based pedagogy has on students’ ability to make ethical decisions. We used a pre- and post-test methodology to assess the effect of using cases to teach ethics in a finance course. We also wanted to determine whether recent corporate ethics scandals might have impacted students’ perceptions of the importance and prevalence of ethics in business, so we used in-depth case studies of several of the major scandals (e.g., Enron, Tyco, Adelphia). Our results are somewhat surprising since studying ethics scandals positively impacts students’ ethical decision making and their perceptions of the ethics of businesspeople.     

Leadership, Ethics and Responsibility to the Other

Of recent time, there has been a proliferation of concerns with ethical leadership within corporate business not least because of the numerous scandals at Enron, Worldcom, Parmalat, and two major Irish banks – Allied Irish Bank (AIB) and National Irish Bank (NIB). These have not only threatened the position of many senior corporate managers but also the financial survival of some of the companies over which they preside. Some authors have attributed these scandals to the pre-eminence of a focus on increasing shareholder value in Western business schools and/or to their failure to inculcate ethical standards. In this paper, we challenge these accounts and the aetiological view of knowledge from which they derive but are grateful for the consensus that they convey regarding the importance of business ethics. The paper focuses on different approaches to ethical leadership concluding with a view that some hybrid of MacIntyre’s virtue ethics and Levinas’s ethics of responsibility may serve as an inspiration for both educators and practitioners. Dr. David Knights is a Professor of Organisational Analysis in the School of Economic and Management Studies at Keele University. He previously held chairs in Manchester, Nottingham and Exeter Universities. He is a founding and continuing editor of the journal Gender, Work and Organisation and his most recent books include: Management Lives, Sage, 1999 (with H. Willmott) and Organization and Innovation, McGraw-Hill, 2003 (with D. McCabe). Majella O’Leary is a Lecturer in Management at the University of Exeter. Her research interests include corporate scandals, ethical leadership, disaster sensemaking, and organizational storytelling. Majella’s most recent publications have appeared in Human Relations and European Journal of Business Ethics.     

Good Apples,Bad Apples: Sorting Among Chinese Companies Traded in the U.S.

Committing financial fraud is a serious breach of business ethics. However, there are few large scale studies of financial fraud, which involve ethical considerations. In this study, we investigate the pervasive financial scandals, which by the end of 2012 involved more than a third of the US-listed Chinese companies. Based on a sample of 262 US-listed Chinese companies, we analyze factors that differentiate between firms that commit financial fraud and those that do not. We find that firms more predisposed to unethical behavior, due to their low regional social trust in the home country and low respect for regulations and laws as proxied by political connections, are more likely to commit accounting and financial fraud. They take advantage of low hurdles for listing via reverse mergers and avoid third-party monitoring through poor governance and auditors. Finally, we find evidence, after these scandals, of non-fraudulent firms differentiating themselves from the fraudulent firms by sending costly signals such as insiders purchasing shares, increasing dividends, and going private.     

Linking Ethics and Risk Management in Taxation: Evidence from an Exploratory Study in Ireland and the UK

Ethical dilemmas involving tax issues were identified by members of the American Institute of Certified Public Accountants as posing the most difficult ethical problem for them (Finn et al., Journal of Business Ethics 7(8), pp. 607–609, 1988). The KPMG tax shelter fraud case proves that the tax profession has not gone untainted in the age of numerous accounting and corporate scandals, such as the Enron débacle (Sikka and Hampton, Accounting Forum 29(3), 325–343, 2005). High-profile scandals serve to highlight the problems caused by differences in ethical judgement among accountants and tax practitioners and the issue of ethics has been brought publicly to the forefront of the profession. Nevertheless, the nature and dimension of ethical issues in tax practice have been largely unexplored (Erard, Journal of Public Economics 52(2), 163–197, 1993; Marshall et al., Journal of Business Ethics 17(12), 1265–1279, 1998; Frecknall Hughes, Unpublished PhD Thesis, The University of Leeds, 2002). This research aims to contribute to the debate on ethics in tax practice by reporting interview data on tax practitioners’ perceptions of ethics in the jurisdictions of Ireland and the United Kingdom and exploring the link or equation of ethics with risk management.     

An Examination of Leader Portrayals in the U.S. Business Press Following the Landmark Scandals of the Early 21st Century

Following the landmark corporate scandals of the early 21st century, there appeared to be a tremendous increase in the U.S. business media’s emphasis on issues of ethics in corporate leadership. The purpose of this research was to examine whether that apparent increase was reflected in an actual change in that media’s portrayals of successful leaders. We content analyzed the text of a total of 180 articles in Business Week, Fortune, and Forbes magazine, 90 from the five years preceding the landmark scandals and 90 from the five years following the scandals. We found no evidence that the landmark scandals had any impact on the media’s incorporation of ethics in their portrayals of leaders. We attribute this substantially to the persistence of a worldview in the U.S. business press that emphasizes leader traits and actions that have a direct impact on corporate profits. Additionally, we found some interesting consistencies and differences in media portrayals across the two time periods, likely related to the rise and fall of dot-com businesses. We discuss the implications of these findings for researchers and corporate leaders. David R. Hannah is an Assistant Professor of Management and Organization Studies at Simon Fraser University. He received his Ph.D. from the University of Texas at Austin. In addition to media portrayals of leaders, his research interests include trade secret protection in organizations, qualitative research methods, and employee socialization. His work has been published in numerous journals and books, including Organization Science, Journal of Management Studies, Sloan Management Review, and Creativity and Innovation Management Christopher D. Zatzick is an Assistant Professor of Management and Organization Studies at Simon Fraser University. He received his Ph.D. from the University of California at Irvine. His research interests include high-performance work systems, downsizing, diversity, and leadership. His work has appeared␣in leading management journals including Academy of Management Journal, Organization Science, and Industrial Relations.     

Ethics Education and the Role of the Symbolic Market

This study responds to suggestions that business-school faculty are promoting distorted views of human nature and out-dated notions of ethics. Specifically, the paper examines in-depth interviews with a sample of 15 faculty centrally-positioned within the field’s symbolic market, namely, academics who completed their Ph.D. programs in the same institutional space as the editors of five top accounting journals. The paper finds that ethics are for the most part important to these individuals, but that the field’s general adherence to the neoclassical economic model creates pressures that militate against a deeper concern for and more adequate treatment of the topic. Jeff S. Everett teaches financial accounting at the University of Calgary's Haskayne School of Business. Along with his research on accounting education, Jeff has also conducted research in the areas of professional ethics, environmental accounting, and corruption.     

The Impact of Business Education on Moral Judgment Competence: An Empirical Study

Recent highly publicized ethical breaches including those at Enron and WorldCom have focused attention on ethical behavior within the accounting profession. At the heart of the debate is whether ethical attitudes of accountants are to blame. Using a nationally representative sample of accounting practitioners and a multidisciplinary student sample at two Southern United States universities, we compare sample responses to 25 ethically charged vignettes to test whether they differ. Overall, we find no significant difference – even for a specific “accounting tricks” vignette, which resembles the Enron and WorldCom situations. We do find, however, that the practitioners were more accepting of vignettes that involved physical harm (PH) to individuals and those that were legal (but ethically questionable). We postulate that accounting practitioners may apply a legalistic framework to their assessment of the acceptability of each vignette. Focusing on an “accounting tricks” vignette, we also find no significant difference between auditors and institutional practitioners compared to all other types of accountants in the sample. We conclude that ethical attitudes of accounting practitioners do not differ significantly by specialty area. Tisha L. N. Emerson is an Assistant Professor of Economics at Baylor University in Texas. In addition to business ethics, Professor Emerson has published articles in the areas of environmental economics and economic education. She teaches courses in environmental economics, international trade, intermediate microeconomics and microeconomic principles. Stephen J. Conroy is an Associate Professor of Economics at the University of San Diego in California. In addition to business ethics, Professor Conroy has published articles in the areas of economic development and demography, economics of education and economics of aging. He teaches courses in managerial economics at both the graduate and undergraduate level, as well as undergraduate courses in urban and regional economic development, intermediate microeconomics and principles of micro- and macroeconomics. Charles W. Stanley is an Associate Professor of Accounting at Baylor University in Texas. In addition to business ethics, Dr. Stanley has published articles in the areas of financial accounting, managerial accounting, auditing, accounting systems, tax, and professional ethics for accountants. He has also authored several on-line continuing education courses for CPAs including one that meets the Texas State Board of Accountancy requirements for continuing education by Texas CPAs. He teaches courses in auditing, ethics, financial accounting and managerial accounting in the MBA program at Baylor.     

The Effect of Groupwork on Ethical Decision-Making of Accountancy Students

Recent accounting scandals involving the collapse of large corporate firms have brought into question the adequacy of ethics education within accounting programs. This paper investigates the ethical decisions of accountancy students and in particular analyses the effect of group (as opposed to individual) decision-making on ethical decisions. Final year accountancy students (sample size of 165) were randomly allocated into two experimental conditions. The participants were then presented with five (5) ethical vignettes. One experimental condition involved completing the ethical decisions as individuals (60). The other involved completing the ethical decision-making as a group of 3–4 participants (34). A consistent pattern of behaviour was observed in the analysis of individual versus group responses. Individuals displayed stronger tendencies than groups to take the extreme actions of acting either unethically or ethically (whistleblowing), whereas groups displayed stronger tendencies to take the safer (neutral) options. It was concluded that groups reached consensus decisions, in an ethical context, probably as a result of peer pressure. The significant implication of this finding is in relation to the emphasis accounting programs place on group work. Group work may enhance students’ abilities to work as a team. However, as revealed in this study’s results, group work may not be an effective means of producing the optimal decision in all subject matter areas, especially complex areas such as ethical decision-making.     

Application and Assessment of an Ethics Presentation for Accounting and Business Classes

This paper describes a presentation on ethics for accounting and business students. In 2001 and 2002, major corporate failures such as Enron and Worldcom, combined with questionable accounting practices, made ethics a paramount concern to persons working in business and accounting. While financial statement analysis and regulatory requirements are important technical topics, the issue of ethics provides faculty a unique and very appropriate setting to discuss deeper truths about doing business and living life well. This paper briefly describes the development and assessment of one approach to presenting ethics built around a computerized slide show (PowerPoint). The goal of the presentation is to increase students’ understanding of the essential role of ethics to accounting and business. Following the presentation, students indicated a heightened recognition of the importance of ethics. Educators should do all that they can to encourage students to do the “right” thing, even in difficult circumstances. This encouragement may serve them well in school and later in their careers.     

Accountants’ Value Preferences and Moral Reasoning

This paper examines relationships between accountants’ personal values and their moral reasoning. In particular, we hypothesize that there is an inverse relationship between accountants’ “Conformity” values and principled moral reasoning. This investigation is important because the literature suggests that conformity with rule-based standards may be one reason for professional accountants’ relatively lower scores on measures of moral reasoning (Abdolmohammadi et al. J Bus Ethics 16 (1997) 1717). We administered the Rokeach Values Survey (RVS) (Rokeach: 1973, The Nature of Human Values (The Free Press, New York)) and the Defining Issues Test (DIT) (Rest: 1979, Development in Judgment Moral Issues (University of Minnesota Press, Minneapolis, MN)) to164 graduating accounting students enrolled in capstone courses at two universities in the Northeastern United States. As potential entrants into the accounting profession, these subjects bring their values and moral reasoning to bear on attitudes and behaviors in the workplace. We find a highly significant inverse relationship between “Conformity” values and principled moral reasoning (i.e., those who prefer Conformity values have lower levels of moral reasoning). However, we also find that accounting students as a group do not prefer Conformity values above other values such as Self-actualization and Idealism, and we find positive relationships between Self-actualization and Idealism values and moral reasoning. Implications for values and ethics research are discussed.An earlier version of this paper was presented at a workshop at Bentley College and we have greatly benefited from participants comments, especially those of Jean Bedard, Marty Howe, James Hunton, Mark Nixon, and Jay Thibodeau.Mohammad J. Abdolmohammadi is the John E. Rhodes Professor of Accountancy at Bentley College. Having interest primarily in behavioral auditing and ethics research, professor Abdolmohammadi has published extensively in Accounting and Business Research, The Accounting Review, Advances in Accounting, Auditing: a Journal of Practice and Theory, Behavioral Research In Accounting, Contemporary Accounting Research, Journal of Business Ethics, Teaching Business Ethics, and Organizational Behavior and Human Decision Processes among others.C. Richard Baker is Professor of Accounting at Adelphi University. His primary research interests are in regulatory, ethical and disciplinary aspects of the public accounting profession. He has published over fifty journal articles in accounting and ethics research.     

Do the Numbers Add Up to Different Views? Perceptions of Ethical Faculty Behavior Among Faculty in Quantitative Versus Qualitative Disciplines

Faculty across a wide range of academic disciplines at 89 AASCB-accredited U.S. business schools were surveyed regarding their perceptions of the ethical nature of faculty behaviors related to undergraduate course content, student evaluation, educational environment, research issues, financial and material transactions, and social and sexual relationships. We analyzed responses based on whether instruction in the academic discipline focused mainly on quantitative topics or largely on qualitative issues. Faculty who represented quantitative disciplines such as accounting and finance (n = 383) were more likely to view behaviors such as selling complimentary textbooks and grading on a strict curve as more ethical than faculty representing more qualitative disciplines such as management and marketing (n = 447). In contrast, faculty in quantitative disciplines were more likely to view behaviors such as showing controversial media and bringing up sexual or racial charged matters as less ethical than their counterparts. Whereas these differences may be attributed to the respondents’ academic backgrounds, the large level of agreement on ethical behaviors raises questions about the growing influence of business disciplines that operate within more unified research and teaching paradigms. Linda Kidwell (PhD, Louisiana State University) is an associate professor in the Accounting Department at the University of Wyoming where she teaches auditing as well as accounting ethics. Her research interests include academic ethics, auditing ethics, and governmental auditing. Her research has been published in the Journal of Business Ethics, Teaching Business Ethics, CPA Journal, Journal of Accounting and Public Policy and elsewhere. She has taught in the United States, Australia, and Canada. She has also been a frequent faculty mentor in the National Conference on Ethics in America held annually at the United States Military Academy (West Point). Roland Kidwell (PhD, Louisiana State University) is an associate professor in the Management and Marketing Department at the University of Wyoming where he teaches courses in new ventures, human resource management and general management. His current research interests include ethical issues involving family businesses and new ventures, social entrepreneurship, and workplace deviance such as withholding effort (free riding, shirking, social loafing) in organizational contexts. He is co-editor of a book of readings and cases, Managing Organizational Deviance (2005, Sage), and his research has appeared in Academy of Management Review, Journal of Business Ethics, Journal of Management, Journal of Business and Psychology and elsewhere.     

Corporate Social Responsibility and Crony Capitalism in Taiwan

Corporate social responsibility (CSR) has become increasingly popular in advanced economies in the West. In contrast, CSR awareness in Asia is rather low, both on the corporate and state level. However, recent events have shown that the CSR is receiving more attention by corporations in Asia. Recent development in CSR in Taiwan is one example of such a trend. A 2005 survey on the 700 publicly listed companies in Taiwan on␣CSR has highlighted the current CSR situation. Concurrently, the numbers of corporate scandals and corruption have dramatically increased over the past 6 years. Corporate CSR activities co-existing with pervasive corporate scandals create a phenomenon of contradictions. This article aims to report via the survey findings the current development of business ethics in corporate Taiwan; and to interpret the findings in context of Taiwan’s business ethos, especially its Confucian familism and crony capitalism. Po-Keung Ip, Ph.D., Professor of the Graduate Institute of Philosophy, National Central University, Taiwan. He is concurrently the Institute’s Director of the Applied Ethics Center. His research interests include business ethics, bioethics, and well-being of nations. His recent publications include Constructing a Social Contract for Corporations (2002), Business Ethics – Multistakeholder Responsibilities of the Corporation (2005) (in Chinese). Currently he is working on a book The Challenge of Corporate Social Responsibilities in Chinese Cultural Communities.     

Moral Markets and Moral Managers Revisited

In the wake of recent corporate scandals, this paper examines the claim made by John Boatright that business ethics, as it is currently conceived, “rests on a mistake.” Ethics in business should not be achieved through managerial vision, discretion or responsibility; rather, ethics should shape the design of institutions that regulate business from the outside. What ethicists should advocate for, according to Boatright, are moral markets not moral managers. I explore the empirical and normative dimensions of his claim with special attention paid to the extent to which Boatright’s development of the economic theory of the firm supports his position. I conclude by suggesting some reasons why moral markets and moral management are compatible frameworks for corporate reform.     

An Exploratory Study of Chinese Accounting Students’ and Auditors’ Audit-specific Ethical Reasoning

This study uses three audit-specific ethical dilemmas to assess the level of ethical reasoning between Chinese accounting students (as proxies for new entrants to the auditing profession) and experienced auditors. A sample of U.S. accounting students is used as a base for comparison. Consistent with expectations based on particularly salient aspects of Chinese national culture, we find the Chinese students’ levels of ethical reasoning to be significantly lower than those of their U.S. counterparts in the two cases that invoked these cultural attributes. In contrast, the Chinese students’ level of ethical reasoning is slightly higher than that of the U.S. students in the third, control case. We further find that the Chinese auditors’ levels of ethical reasoning are even lower than those of the Chinese students in two cases, while not being significantly different in the third. Together, these findings suggest that cross-national differences in auditors’ ethical reasoning depend on the nature of the ethical dilemma and caution against wholesale inferences about ethical reasoning levels in China.     

A Model of Ethical Decision Making: The Integration of Process and Content

We develop a model of ethical decision making that integrates the decision-making process and the content variables considered by individuals facing ethical dilemmas. The process described in the model is drawn from Janis and Mann’s [1977, Decision Making: A Psychological Analysis of Conflict Choice and Commitment (The Free Press, New York)] work describing the decision process in an environment of conflict, choice and commitment. The model is enhanced by the inclusion of content variables derived from the ethics literature. The resulting integrated model aids in understanding the complexity of the decision process used by individuals facing ethical dilemmas and suggests variable interactions that could be field-tested. A better understanding of the process will help managers develop policies that enhance the likelihood of ethical behavior in their organizations. Roselie McDevitt Sc.D. is Assistant Professor of Accounting at␣the Charles F. Dolan School of Business at Fairfield University in Fairfield, Connecticut. Dr. McDevitt teaches financial and managerial accounting. Her Primary areas of research are accounting education and accounting ethics. Catherine Giapponi is an Assistant Professor of Management at the Charles F. Dolan School of Business at Fairfield University in Fairfield, Connecticut. Dr. Giapponi teaches courses in management, organizational behavior, and strategy. Her primary areas of research are corporate governance and business ethics. Cheryl Tromley, Ph.D., is a Professor of Management at␣Fairfield University where she has taught management, organizational behavior, organizational communication, organizational␣culture, organization development, and diversity for 19 years. She has co-authored two editions of the text ``Developing Managerial Skills in Organizational Behavior'␣as well authored or co-authored a significant number of professional articles and presentations related to management and management education.     

Frank P. Jozsa, Jr. Sports Capitalism: The Foreign Business of American Professional Leagues. Aldershot, Hants, U.K., and Burlington, Vt.: Ashgate Publishing Limited, 2004. xiv + 316 pp. ISBN 0-7546-4185-6, $99.95 (cloth).

Students of international business will find this a useful andfrustrating book. It is encyclopedic in its coverage and exhaustivelyresearched. Approximately 20 percent of the book’s 316pages consists of notes, while another 10 percent is bibliography.The book is intended for nonspecialists; a glossary includesterms as diverse as economic profit, Hall of Fame, Super Bowl,and work ethic. Of these, only ‘Super Bowl’ appearsin the extremely short, five-and-a-half page index. Jozsa’srole has been to organize this material and bring     

The Challenge of Developing a Business Ethics in China

The challenge of developing a business ethics in China in response to today’s increasing demands of Corporate Social Responsibility (CSR) is examined within the context of recent business scandals, food scare, labor issues, and environmental degradations the country is now experiencing. Two surveys on CSR are reported. This paper reports the recent CSR development in China and outlines the profile of a prospective business ethics for China. The formal constraints and substantive components of this business ethics are proposed against the background of China’s cultural and ideological heritage.     

Ethics in accounting education: What is really being done

Recent developments in the business world have caused the academic community to address the coverage of ethics in the accounting curriculum. This study surveyed accounting faculty to: (1) examine perceptions about ethics coverage in the undergraduate accounting courses; (2) identify teaching methods used to include ethics in the undergraduate accounting courses, the perceived effectiveness of those methods and the amount of time spent on ethics coverage; and (3) to identify problems encountered in including ethics in accounting courses. The study found that although a large majority of the professors surveyed (77%) said they include ethics, 69% felt that there was a need for more ethics coverage. Also, the study revealed that while the lecture method was the most commonly used method, the written case was deemed the most effective method. The average time spent covering ethics was a little over 3 hours per course. The most significant problems encountered by faculty who include ethics in their undergraduate accounting courses was not enough time and lack of appropriate ethics materials.Edward E. Milam is a Professor at Mississippi State University and former Dean of the School of Accountancy at the University of Mississippi. Dr. Milam has authored several books on estate taxation and has articles published in several journals includingEstate Planning, Trusts and Estates, Taxation for Accountants, andThe Financial Executive. Currently, Dr. Milam is serving on the Board of Directors of the Mississippi Tax Institute.Frances M. McNair is an Associate Professor at Mississippi State University. Dr. McNair has authored a book in tax practice and has articles published in several journals including theJournal of Accountancy, Taxation for Lawyers, andThe Practical Accountant.