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Auditor Ethics: Do Experience and Gender Influence Auditors’ Moral Awareness?
Abstract
Purpose: The purpose of this paper is to examine how experience and gender relate to the auditors' moral awareness.
Design/methodology/approach: Hypotheses are informed by a neurocognitive approach of ethical decision-making and tested using survey data from 191 auditors of a Big Four audit firm in The Netherlands.
Findings: The main findings indicate that more experienced auditors (i.e., those with more years of work experience, a higher rank, and a higher age) show higher levels of moral awareness. This positive relationship is stronger for morally questionable situations related to accounting and auditing, compared to general business moral dilemmas. In addition, the results support the expectation that on average, female auditors have higher moral awareness than their male counterparts.
Originality/value: To our knowledge, this is the first study that considers a neurocognitive approach to inform hypotheses about the antecedents of auditors' moral awareness. The findings suggest that the involvement of experienced auditors in ethical decision-making processes may be beneficial given their enhanced ability to identify ethically disputable situations as such. Furthermore, increasing the number of females in senior positions may positively affect ethical decision-making in audit firms. Lastly, this paper presents directions for future research.
... This process involves the active participation of employees, aiming to implement technological processes successfully, as technology and digitalization have become integral aspects of modern business practices. A crucial aspect of examining the impact of digitization and digital transformation at the company level is considering the ethical context where ethical issues may vary depending on the various types of moral dilemmas (Carrera & Van der Kolk, 2021). Over the past decades, the role of ethics in business, particularly in digital business, has increased in significance (Paoloni et al., 2023), alongside numerous studies on how to foster strong ethical climates by making ethical decisions (Glover et al., 2002). ...
... Ethics, as the set of standards followed by companies (Goel & Ramanathan, 2014), or the practice of making principled choices between right and wrong, plays a pivotal role in guiding individual behavior and addressing significant challenges at the individual level. The first step in the ethical decision-making process is moral awareness, forming the foundation for subsequent intentions and actions (Carrera & Van Der Kolk, 2021). In addition to considering the presence or absence of ethical awareness, it is crucial to explore variations in business ethics and ethicality among individuals, encompassing external affiliations, groups, cultures, and regions, especially in the context of the digital environment. ...
... This transformation is further highlighted by the disparities in ethical orientation and the assessment of ethical behavior between women and men. Understanding how gender relates to moral awareness and the perception of ethics in the digital environment is essential for comprehensive research (Carrera & Van Der Kolk, 2021), although the consideration and awareness of gender diversity in the digital business extend into a complex and intricate process (Mindel, 2022). ...
As organizations grapple with the transformative implications of business digitization, the intricate interplay between technological progress, sustainable development, and ethical responsibilities becomes increasingly apparent. This article explores the influence of gender diversity on business ethics within the digital environment. An elevated perspective, infused with an ethical approach embracing gender diversity, leads to a deeper and more holistic understanding of these multifaceted dynamics, poised to inform, and guide decisions over the long term. Research investigating the ethical inclinations of men and women in the business and digital realm reveals a noteworthy trend: women attribute higher importance to ethical standards in digital business compared to men. Women tend to exhibit a stronger moral inclination and are more attuned to unethical practices, particularly in the context of the challenges and complexities accompanying digital transition. The study uncovers that women display a lower tolerance for unethical behavior, including negotiation strategies, underscoring their more pronounced ethical stance. This discrepancy is attributed to women's deeper integration of morality into their self-identities, fostering heightened sensitivity to interpersonal dynamics and emotions, while men lean towards an independent and less reliant self-perception. Such gender-based disparities have the potential to significantly impact organizational leadership dynamics. However, it is crucial to refrain from overgeneralizing and assuming that male employees engage in unethical conduct more frequently than their female counterparts, particularly in contexts that prioritize moral leadership principles. Moreover, it is noteworthy that financial incentives possess the capacity to compromise the ethical compass of individuals, irrespective of gender. Still, gender plays a pivotal role in shaping ethical decisions, irrespective of whether they are made within a personal or corporate setting.
... Growing evidence suggests that moral development affects both sensitivity to ethical issues and auditor judgments concerning work-related dilemmas (Jeffrey et al., 2004). Several studies (Carrera and Van Der Kolk, 2021;Adeel et al., 2021; Espinosa-Pike and Barrainkua, 2016;Dalton et al., 2014;Karacaer et al., 2009;Curtis, 2006;Karcher, 1996;Merchant and Rockness, 1994) examine the impact of personal auditor values (i.e. age, gender and experience) on auditor decision-making. ...
... Concerning work experience, Espinosa-Pike and Barrainkua (2016) found a positive and significant link between work experience and auditor ethical judgment. A recent study conducted by Carrera and Van Der Kolk (2021) found that more experienced auditors show higher levels of moral awareness. (2003), Gul et al. (2003), Au and Wong (2000), Sweeney and Roberts (1997), Tsui and Gul (1996), Karcher (1996), Merchant and Rockness (1994), LAMPE and FINN (1992) 13 ...
Purpose
To the best of the authors' knowledge, this is the first study that aims to present a comprehensive view of the auditing ethics literature by unboxing 40 years of efforts in the field.
Design/methodology/approach
This study combined bibliometric, social network and content analysis by analyzing 114 articles published in accounting and top business ethics journals on the Web of Science database from 1980 to 2021.
Findings
The results show a rising interest in this topic and reveal auditors’ ethical decision-making and moral reasoning as the most discussed topics in the literature. The work also clusters the literature according to keywords and scopes, identifying literature gaps and suggesting new avenues for future research.
Practical implications
The research results assist provide an overarching image of the auditing ethics field. In addition, these results draw possible future avenues to bridge the void in the current auditing ethics literature by presenting indispensable directions for potential research. For example, future research could pay more attention to whistleblowing, fraud, personal auditor characteristics, auditor ethical sensitivity, auditor ethical conflict, ethical climate and underreporting of time. Moreover, the rapidly changing business environment necessitates the auditing ethics research to move to more practical implications to mitigate previous mistakes and avoid any future risks.
Originality/value
All crises are an ideal breeding ground to motivate fraud and audit failures. In fact, auditing ethics research has been subordinated to the different economic crises. However, despite increasing awareness of the topic’s relevance, no comprehensive study focuses on auditing ethics literature. Now, the devastating effects of the COVID-19 crisis are producing a new wave of financial distresses and avoiding former mistakes is timelier than ever. With this novel and integrated approach, this work goes one step forward, developing a comprehensive picture of the auditing ethics literature.
... It has been determined that UTAUT is an appropriate choice for this investigation due to the fact that it incorporates aspects of a variety of well-known IT/IS theoretical models. They put their product through a gruelling battery of tests in a wide variety of scenarios to ensure that it was reliable [8]. They came to a conclusion based on the data that their model was plausible and could explain up to 74% of the diversity in people's claimed motives for adopting new technology. ...
The purpose of this study was to investigate the IT usage rate among accountants in Jordan and the factors that affect the IT usage rate. The proposed model examines the impact of IT skills, IT education, and corporate categories on her use of IT. The researcher used a survey questionnaire and collected data from 96 external people representing companies operating in Jordan. All the responses from the people are analyzed in the SPSS software. A partial least squares (PLS) structural equation modelling approach was used to analyze the data and test the proposed model. As a result, it was found that IT skills and IT training significantly contributed to her IT utilization by external stakeholders. The originality of this white paper lies in the way it contributes to understanding the combined effects of IT knowledge and training to understand how to use IT. In addition, we develop our current understanding of the mitigating effects of Big 4 and non-Big four firm categories on the relationship between IT training and the external auditor's use of IT.
... They are also better able to provide reasonable explanations for errors in financial statements and classify errors based on audit objectives and the structure of the underlying accounting system. Then (Carrera and Van Der Kolk, 2021) succeeded in showing that the more experienced the auditors are, the more sensitive they are to misstatements of financial statements, and the more they understand things related to the errors they find. ...
Public accountants are independent auditors who provide services to the general public, especially in auditing financial statements made by their clients. The task of a public accountant is to examine and give an opinion on the fairness of the financial statements of a business entity based on predetermined standards. The public accounting profession is responsible for increasing the reliability of the company's financial statements. The public can obtain reliable financial statement information as a basis for decision-making. The research objective is to answer the phenomenon of the variable, namely the Effect of Auditor Competence, Audit Complexity, Auditor Independence on Audit Quality. The research method uses Multiple Regression Analysis. From the research results obtained the following results Auditor Independence has the most dominant effect on Audit Quality, Audit Complexity also has a significant but negative impact on Audit Quality. Meanwhile, Auditor Competence also significantly impacts Audit Quality.
... Wahid & Grigg (2021) menjelaskan bahwa perilaku profesional dimaksudkan untuk mematuhi peraturan perundang-undangan yang berlaku. Sekaligus menampilkan besarnya tanggung jawab yang harus dilakukan untuk menghasilkan capaian hasil audit yang baik (Carrera & Kolk, 2021). Ariail et al. (2020) berargumentasi bahwa nilai-nilai profesi yang tertanam dalam kode etik memandu tindakan akuntan dan auditor dalam memenuhi tanggung jawab profesionalnya. ...
Abstrak - Menggagas Penerapan Kode Etik Akuntan Publik dalam Budaya Bugis
Tujuan Utama - Penelitian ini bertujuan menggagas penerapan kode etik akuntan publik dengan berlandaskan nilai kehidupan manusia Bugis.
Metode - Penelitian ini menggunakan metode analisis nilai budaya Bugis. Wawancara terhadap auditor dan pengamat budaya dilakukan untuk memperkuat analisis budaya.
Temuan Utama - Penelitian ini menjelaskan bahwa perpaduan nilai kehidupan lempu, getteng, warani dan acca dapat memperkukuh auditor dalam memegang prinsip kode etik. Selain itu, nilai siri’ membuat auditor bersikap professional. Terdapat pula nilai reso’ yang berfungsi meningkatkan motivasi auditor dalam bekerja.
Implikasi Teori dan Kebijakan – Nilai kehidupan manusia bugis akan menjunjung tinggi penerapan kode etik akuntan publik. Implikasinya kode etik akan dipandang sebagai tanggung jawab moral pribadi yang melekat sebagai jiwa dalam diri seorang akuntan publik.
Kebaruan Penelitian - Penelitian ini mengkaji penerapan kode etik melalui persepsi kebudayaan bugis.
Abstract - Public Accountant Code of Ethics Implementation in Bugis Culture
Main Purpose - This study aims to implement a code of ethics for public accountants based on Bugis culture.
Methods - This study uses the method of analyzing Bugis cultural values. Interviews with auditors and cultural observers were conducted to strengthen the cultural analysis.
Main Findings - This study explains that the combination of the values of “lempu,” “getting,” “warani,” and “acca” can strengthen auditors in adhering to the principles of the code of ethics. In addition, the “siri'” value makes the auditor behave professionally. There is also a “'reso'” value that increases the auditor's motivation at work.
Theory and Practical Implications - The value of Bugis human life will uphold the code of ethics for public accountants. The implication is that the code of ethics will be seen as a personal moral responsibility inherent as the soul of a public accountant.
Novelty - This study examines the application of the code of ethics through the perception of Bugis culture.
In this study, we explore whether auditor experience has an effect on stock price crash risk. Using a sample of Chinese firms, we find a negative association between auditor experience and stock price crash risk, especially in firms with high client importance. The path analysis shows that accounting information transparency plays a mediating role in the relationship between auditor experience and stock price crash risk. And the effect of auditor experience on clients' stock price crash risk is dominant when auditor tenure is short and when the firm is audited by non‐Big Four audit firms.
This study presents novel evidence of gender differences in public sector audits. Auditors of public sector entities face lower litigation risks and lower market pressures than those of private entities. Thus, our analysis is more likely to capture gender differences in professional competence than in economic incentives. We test the study hypotheses regarding gender differences in 'qualifying' audit reports using a sample of Spanish public universities (2010-2020). We find that female and male auditors are equally likely to issue qualified opinions. However , their reasons for qualification differ, with women being more likely to qualify reports because of scope limitations. In joint audits, gender-diverse audit partners are more likely to increase scope limitations. These results suggest that women are more conservative than men are when assessing the impact of audit scope limitations , with no gender differences in responses to material misstatements.
This paper examines factors affecting audit quality in Palestinian audit firms in the Gaza Strip during COVID-19 pandemic. Using the descriptive-analytical technique, a questionnaire was designed to collect data from all Palestinian audit firms in the Gaza Strip. Multiple regression analysis was used to evaluate the data collected from 117 respondents. The findings revealed that the independent variables (i.e. auditor experience, objectivity and independence of the auditor, and the auditor’s awareness of the importance of audit quality) had an impact on audit quality. While this study expands on previous research, it also yields that data might benefit academics and practitioners in their efforts to improve audit quality.KeywordsAuditor experienceObjectivity and independence of the auditorAuditor’s awarenessAudit qualityPalestine
Research has offered a pessimistic (although limited) view regarding the effectiveness of ethical champions in teams and the social consequences they are likely to experience. To challenge this view, we conducted two multimethod (quantitative/qualitative) experimental studies in the context of entrepreneurial team decision-making to examine whether and how an ethical champion can shape team decision ethicality and whether ethical champions experience interpersonal costs. In Study 1, we found that confederate ethical champions influenced team decisions to be more ethical by increasing team ethical awareness. Focusing on the emotional expressions of ethical champions, we found that sympathetic and angry ethical champions both increased team decision ethicality but that angry ethical champions were more disliked. Analysis of team interaction videos further revealed moral disengagement in team discussions and the emergence of nonconfederate ethical champions who used business frames to argue for the ethical decision. Those emergent phenomena shifted our focus, in Study 2, to how ethical champions framed the issues and the mediating processes involved. We found that ethical champions using ethical frames not only increased team ethical awareness but also consequently reduced team moral disengagement, resulting in more ethical team decisions. Ethical champions using business frames also improved team decision ethicality, but by increasing the perceived business utility of the ethical decision. (PsycINFO Database Record (c) 2019 APA, all rights reserved).
This paper examines the integration of ethical considerations in management accounting (MA) education. Drawing on the work of the moral philosopher Alisdair MacIntyre, it is argued that MA instruments such as performance measurement are not morally neutral and bear moral implications. It is argued that the MA student should be trained to take these moral implications into consideration alongside MA's technical aspects. A content analysis is carried out to examine the integration of ethical considerations in top-ranked MA textbooks. The findings indicate that these textbooks, particularly the introductory textbooks, marginally integrate ethical considerations. Furthermore, the findings point to the risk of detaching ethical considerations from the discussion of MA's technical aspects, which may weaken the potential of the ethical considerations and turn them into 'afterthoughts'. Finally, this paper offers suggestions for the improvement of the integration of ethical considerations in MA education and concludes with directions for future research.
Recent, groundbreaking work in neuroscience has illuminated sex differences that could have a profound impact on business organizations. Distinctions between the sexes that may have previously been presumed to be due to “nurture” may now also be demonstrably related to “nature.” Here, we report recent neuroscience findings related to males’ and females’ brain structures and brain chemistry, along with the results of recent neuroeconomic studies. We learn not only that male and female brains are structured differently, but also that different portions of their brains are used for the same tasks, often leading to identical conclusions. Neuroeconomic studies also demonstrate that the effects of hormones—most notably, oxytocin and testosterone—urge males and females to both think and behave differently in ethical situations. We suggest that examination of these new results could benefit six areas of business ethics research: trust, moral decision-making, organizational justice, moral development, the ethic of care, and female management styles. We conclude with a discussion of the implications of these findings for business practice, suggesting that it may be ethical to allow men and women to be treated differently in the workplace: such treatment may be advantageous not only for the workers’ firms, but also for the workers themselves.
This study examines the effects of individual ethical orientation, independence threat (a contextual factor), and moral intensity on auditors’ ethical decision-making process using Jones's issue-contingent model of ethical decision-making in Malaysia. A quasi-experimental design was employed to test the proposed hypotheses formulated for this study. Using WarpPLS, results support the positive direct effects of the independence threats, ethical orientation, and moral intensity of auditors on their ethical decision-making process. Results also suggest that moral intensity mediates the relationships between the auditors’ ethical orientation as well as auditor self-interest threat on the auditors’ ethical decision-making. Auditors with strong ethical orientation relativism, as compared to idealism, demonstrate undesirable ethical decision-making processes. Furthermore, low moral intensity underscores the effectiveness of auditors’ decision-making due to low ethical sensitivity and hence leads to inappropriate ethical decision-making processes and behavior. This study puts forward an auditing perspective through which to understand the ethical dilemmas and the importance of auditors’ moral intensity and ethical orientation in decision-making skills.
Recent advances in cognitive neuroscience research portend well for furthering understanding of many of the fundamental questions in the field of business ethics, both normative and empirical. This article provides an overview of neuroscience methodology and brain structures, and explores the areas in which neuroscience research has contributed findings of value to business ethics, as well as suggesting areas for future research. Neuroscience research is especially capable of providing insight into individual reactions to ethical issues, while also raising challenging normative questions about the nature of moral responsibility, autonomy, intent, and free will. This article also provides a brief summary of the papers included in this special issue, attesting to the richness of scholarly inquiry linking neuroscience and business ethics. We conclude that neuroscience offers considerable promise to the field of business ethics, but we caution against overpromise.
In public accounting, it is well documented that auditors’ focus on the financial/profitability aspects of their work (i.e., commercialism) creates ethical challenges that can compromise the auditors’ ability to uphold the public interest (see, e.g., Bailey, in Curr Issues Audit 2(1):C28–C36, 2008; Chow et al., in Res Prof Responsib Ethics Account 17:97–138, 2013; Fogarty and Rigsby, in J Account Org Change 6(3):300–329, 2010; Gendron, in Contemp Account Res 18(2):283–310, 2001; Account Org Soc 27(7):659–684, 2002; Lampe and Garcia, in Res Prof Responsib Ethics Account 17:1–45, 2013; Wyatt, in Account Horiz 18(1):45–53, 2004; Zeff, Account Horizons 17(3):189–205, 2003a; Account Horizons 17(4):267–286, 2003b). Less well-studied are other accounting settings (cf., Bampton and Cowton, in J Bus Ethics, 114(3):549–563, 2013; Jones et al., in J Account Literature 22:45–103, 2003). In their paper, Fiolleau and Kaplan (J Bus Ethics (Forthcoming), 2016) address the void by providing insight into the impact of corporate reward structure (context) on the ethical sensitivity of accountants practicing in industry and accounting students (non-auditors). Further, they contribute to the literature by measuring ethical sensitivity using a novel funnel questioning technique, which addresses methodological challenges associated with studying ethical sensitivity. In these comments, I discuss my perspective on Fiolleau and Kaplan’s (J Bus Ethics (Forthcoming), 2016) key contributions to the literature and provide suggestions for moving the research forward in the future.
It has long been recognized that accountants practicing in business settings have a dual role: (1) as employees, they are bound to the organization, and (2) as professionals, they are bound by the profession’s code of ethical conduct (Westra, Journal of Business Ethics 5(2): 119–128, 1986). These two roles highlight the need to recognize and consider both the ethical and economic implications of their decisions. Practicing industry accountants are commonly involved in a broad range of their firm’s business practices and decision making, and are increasingly exposed to the commercial aspects of their companies. Also, during their education, they were trained on their professional responsibilities. However, in general, this education was not recent and may not have been reinforced. By contrast, accounting students have been recently and repeatedly exposed to and have knowledge about their professional responsibilities as an accountant, but limited, if any, exposure to the commercial aspects of business. Consequently, our first hypothesis predicts that the ethical sensitivity of practicing industry accountants will be lower than that of accounting students. We find limited support for this hypothesis. Second, we also examine company reward structure and predict that ethical sensitivity will be lower for those in a company with a reward structure narrowly focused only on financial goals as compared to those in a company with a broad reward structure (e.g., including rewards for both financial and non-financial goals). Third, we predict that the difference in ethical sensitivity levels between those in a company with a narrow reward structure as compared to those in a company with a broad financial reward structure will be higher for practicing industry accountants compared to accounting students. Results from our study generally support these last two predictions. Ethical sensitivity is lower for those in a company with a reward structure narrowly focused only on financial goals as compared to those in a company with a broad reward structure, suggesting that companies may be able to increase ethical awareness in their organizations by including non-financial goals in their reward structures.
Ethical decision-making (EDM) descriptive theoretical models often conflict with each other and typically lack comprehensiveness. To address this deficiency, a revised EDM model is proposed that consolidates and attempts to bridge together the varying and sometimes directly conflicting propositions and perspectives that have been advanced. To do so, the paper is organized as follows. First, a review of the various theoretical models of EDM is provided. These models can generally be divided into (a) rationalist-based (i.e., reason); and (b) non-rationalist-based (i.e., intuition and emotion). Second, the proposed model, called ‘Integrated Ethical Decision Making,’ is introduced in order to fill the gaps and bridge the current divide in EDM theory. The individual and situational factors as well as the process of the proposed model are then described. Third, the academic and managerial implications of the proposed model are discussed. Finally, the limitations of the proposed model are presented.
Given the potential dangers of unethical decisions in the workplace, it has become increasingly important for managers to hire, and promote into leadership positions, those who are morally inclined. Behavioral ethics research has contributed to this effort by examining an array of individual difference variables (e.g., locus of control) that play a role in morality. However, past research has focused mostly on direct causal effects and not so much on the processes (including mediation) through which different factors, especially those that are morality based, decrease unethical choices. The purpose of the current research is to examine the process, which includes both subconscious and conscious decision pathways, through which moral attentiveness curbs unethical decision making at the individual level. The findings of a study employing about 200 participants and a cheating task reveal that both accurate ethical prototypes and moral awareness of the situation decreased unethical decisions, and moral attentiveness was found to be positively related to both of these constructs. In addition, having accurate ethical prototypes was found to be a partial mediator between perceptual moral attentiveness and less cheating, while moral awareness was found to be a partial mediator between reflective moral attentiveness and less cheating. The theoretical and practical implications of these findings are discussed.
This meta-analysis synthesizes quantitative findings of the gender differences in moral sensitivity retrieved from 19 primary studies. We found the average effect size of 0.25, favoring women, with a standard deviation of 0.14. The variation in the observed effect sizes could not be attributed to differences in participants' educational level, the utilized measure of moral sensitivity, or the publication format in which the study was reported. This suggests that gender differences in moral sensitivity are consistent across different levels of participants' education regardless of the instrument used to assess moral sensitivity or the format in which the research was reported.
This review summarizes the research on ethical
decision-making from 2004 to 2011. Eighty-four articles
were published during this period, resulting in 357 findings.
Individual findings are categorized by their application to
individual variables, organizational variables, or the concept
of moral intensity as developed by Jones (Acad Manag
Rev 16(2):366–395, 1991). Rest’s (Moral development:
advances in research and theory, Praeger, New York, 1986)
four-step model for ethical decision-making is used to
summarize findings by dependent variable—awareness,
intent, judgment, and behavior. A discussion of findings in
each category is provided in order to uncover trends in the
ethical decision-making literature. A summary of areas of
suggested future research is provided.
Purpose
The primary research question of this study is to what extent auditors comply with auditing standards once they encounter fraud and whether compliance is associated with particular fraud characteristics (i.e. material versus immaterial fraud, management versus employee fraud, statutory versus voluntary audit and external versus internal fraud) as well as with auditor (experience) and audit firm characteristics (Big Four versus non‐Big Four). The study also aims to provide evidence on the role of auditors in redressing fraud. Redress refers to the auditee taking measures to nullify the consequences of the fraud, insofar as possible, and to prevent any recurrence of such fraud.
Design/methodology/approach
To gather data on the role of auditors in fraud cases, a survey was conducted among all audit partners of the top 30 Dutch audit firms. In total, 1,218 audit partners were selected and received a postal questionnaire. In total, 326 questionnaires were returned (27 per cent), of which 296 (24 per cent) were usable.
Findings
The results reveal that auditors fail to comply with some important elements of fraud standards. There are substantial differences among audit firms regarding compliance with the relevant auditing standards. Furthermore, auditors appear to encounter corporate fraud only incidentally. About half of the auditors believe they have a “significant” impact on redressing fraud.
Research limitations/implications
One of the main research findings is that it is difficult for individual auditors to build up expertise in fraud detection. There appears to be a need for specific training programs for auditors to help them to detect fraud, emphasizing the need for mandatory consultation with the technical department of the audit firm once “red flags” indicating fraud are found. Indeed, this need for change has been addressed by the Dutch professional accountancy body NIVRA as a direct result of the findings of this study.
Originality/value
This study extends existing research by investigating the compliance of auditors with fraud standards and it sheds light on the actual redress experiences of auditors. It focuses on the actions taken by auditors – or the lack thereof – in situations where auditors encounter fraud signals. The study indicates that in the absence of good oversight, auditors have mixed incentives when they are confronted with signals for fraud, resulting in actions that are not always in line with existing regulatory requirements.
We address a previous finding in the business ethics literature in which accounting professionals in higher rank levels, i.e.,
“manager” or “partner” of auditing firms, appear to have lower moral reasoning ability than their junior counterparts. Prior
investigations have relied upon a similar methodology for estimating ethical beliefs, namely testing “moral reasoning ability”
using either the Moral Judgment Interview or Defining Issues Test. In the present study, we use a multiple vignettes approach
to test for the existence of the inverse rank-ethical beliefs effect. With only 2 of the 30 vignettes resulting in both managers
and partners being more accepting of the ethically charged behaviors, the results presented here using this alternative methodology
are generally not supportive of the inverse rank-ethical beliefs phenomenon. We also use a multivariate analysis in order
to control for demographic characteristics. Our results suggest that the most robust predictor of ethical attitudes among
accounting practitioners is age, not rank within a firm.
Purpose
The purpose of this paper is to describe, illustrate and provide a deeper understanding of team composition and labor allocation in audit teams by quantifying the exact value of resources at different levels of the audit production. Audit teams have been considered as a black box in audit research. Therefore, this paper reports descriptive statistics on (levels and proportions of) hours and costs allocated to auditor ranks (and the number and value, i.e. billing rates, of auditors for different ranks and the entire team) to shed new light on audit teams.
Design/methodology/approach
This study uses a proprietary data set containing disaggregated information on hours, costs and billing rates for each team member in each of 908 audit engagements. The data are provided by a Swedish Big 4 audit firm. The study uses a purely descriptive approach and categorizes auditors into seven ranks. As size and the publicly listed status are crucial determinants of audit production, the paper splits engagements in public and private companies and reports statistics for size quartiles of both public and private clients.
Findings
The paper provides descriptive statistics for (1) client size, (2) audit team members, (3) audit hours, (4) audit costs, (5) proportion of audit hours, (6) proportion of audit costs, (7) billing rates and (8) variation of billing rates. Results show that compared to private clients, the audit firm allocates higher effort from auditors in higher ranks and lower effort from auditors in lower ranks to public clients. Another finding is that allocation varies with client size for private clients, but less so for public clients.
Originality/value
In an area with sparse literature, this descriptive study serves as a first step to improve our understanding and guide future research. It provides concrete support for previously known theory.
Research on moral judgment has been dominated by rationalist models, in which moral judgment is thought to be caused by moral reasoning. The author gives 4 reasons for considering the hypothesis that moral reasoning does not cause moral judgment; rather, moral reasoning is usually a post hoc construction, generated after a judgment has been reached. The social intuitionist model is presented as an alternative to rationalist models. The model is a social model in that it deemphasizes the private reasoning done by individuals and emphasizes instead the importance of social and cultural influences. The model is an intuitionist model in that it states that moral judgment is generally the result of quick, automatic evaluations (intuitions). The model is more consistent than rationalist models with recent findings in social, cultural, evolutionary, and biological psychology, as well as in anthropology and primatology.
The capacity for survey-based research to advance theoretical knowledge is heavily dependent on the degree to which the measures used capture the constructs that they are intended to represent. Despite the importance of construct validity, the management accounting and control (MAC) literature tends to devote less attention to construct validity than other areas of organizational research. In this article, we discuss contemporary thinking about construct validity and examine how this compares to established practice in MAC research through a systematic review of survey studies from 1996 to 2015. Based on this review, we identify four areas where greater attention is warranted: specifying construct dimensionality, justifying the choice of the measurement model, distinguishing between causal indicators and composite indicators in formative measurement models, and being judicious in the use of single item measures. We discuss the implications of each issue and provide suggestions on how they can be addressed.
We address a series of potential concerns that may arise when applying the survey method. These include: (1) the use of non-random sampling techniques (particularly convenience sampling) and the associated issue of generalizability, (2) the reliance on human informants and biased perceptions in construct measurement, (3) the dependence on single-source data and the problem of common method bias, and (4) the problem of correlated omitted variables. We discuss how (and when) these concerns can affect statistical inferences. Although we conclude that these concerns are easily overstated, we suggest that researchers demonstrate that they either do not apply in their particular research setting, or discuss how they are mitigated.
Recent, groundbreaking work in neuroscience has illuminated sex differences that could have a profound impact on business organizations. Distinctions between the sexes that may have previously been presumed to be due to “nurture” may now also be demonstrably related to “nature.” Here, we report recent neuroscience findings related to males’ and females’ brain structures and brain chemistry, along with the results of recent neuroeconomic studies. We learn not only that male and female brains are structured differently, but also that different portions of their brains are used for the same tasks, often leading to identical conclusions. Neuroeconomic studies also demonstrate that the effects of hormones—most notably, oxytocin and testosterone—urge males and females to both think and behave differently in ethical situations. We suggest that examination of these new results could benefit six areas of business ethics research: trust, moral decision-making, organizational justice, moral development, the ethic of care, and female management styles. We conclude with a discussion of the implications of these findings for business practice, suggesting that it may be ethical to allow men and women to be treated differently in the workplace: such treatment may be advantageous not only for the workers’ firms, but also for the workers themselves.
Though researchers have attempted to understand how biological sex impacts ethical decision making for over thirty years, their efforts have yielded few notable theories and key empirical findings. These less than impressive outcomes can be attributed to many atheoretical attempts through what amounts to no more than vote counting (i.e., who commits more (un)ethical acts, men or women). In an effort to inspire more profoundly scientific investigation of the role of sex in ethical decision making, I set out to review the most grounded theoretical frameworks addressing it, to highlight their key commonalities, differences, and limitations, and to propose directions for future researchers to consider. This effort resulted in identification of three primary theories—moral reasoning/orientation, self-stereotyping, and pragmatism—and two related ones on which future research should be based: gender-identity and neuroscience. The gender identity and neuroscience literatures offer tremendous potential for explaining and predicting sex differences in ethical decision making. Better theories, hopefully, will lead to the development and delivery of more effective interventions to diminish the tremendous costs we all experience for unethical behavior in our societies.
This study investigates the degree to which professional role (auditor or tax professional), decision context (an audit or tax environment), and gender influence the ethical decision making of public accounting professionals. The primary analysis, including all 134 accounting professionals who participated in our experiment, indicates that these participants are both less likely to indicate they would concede to a client in a contentious situation and less likely to recommend conceding when they are in an audit as opposed to tax context. Furthermore, work experience in auditing (as opposed to tax) is associated with a decreased likelihood of conceding to the client in both contexts. However, when data for males and females are analyzed separately, professional role, context, and moral intensity are significantly related to males’ decision making, but are not significant with respect to females’ decisions. This suggests that males and females may use different decision-making processes. Possible theoretical explanations for these findings are discussed.
Previous research has produced contradictory results on whether and how “experience” relates to ethical decision making in the workplace. Maintaining that these divergent findings result from underspecified and inconsistent treatments of experience in the business ethics literature, we build theory around experience and its connection to ethical decision making. To this end, we draw upon and advance research on ethical expertise, defined as the degree to which one is knowledgeable about and skilled at applying moral values within a given work context. We also unpack the nature and consequences of two forms of ethical expertise, convergent and divergent. Building on this foundation—and seeking to reconcile the contradictory results around experience and ethical decision making—we theorize factors associated with the acquisition of ethical expertise in the workplace. We conclude by discussing the implications of our theorizing for business ethics scholarship and expertise research.
The study of moral decision-making presents to us two approaches for understanding such choices. The cognitive and the neurocognitive approaches postulate that reason and reasoning determines moral judgments. On the other hand, the intuitionist approaches postulate that automated intuitions mostly dominate moral judgments. There is a growing concern that neither of these approaches by itself captures all the key aspects of moral judgments. This paper draws on models from neurocognitive research and social-intuitionist research areas to propose an integrative cognitive–intuitive model of moral decision-making. The model suggests that moral decision-making includes five interdependent, yet functionally distinct steps, issue framing, pre-processing, moral judgment, moral reflection, and moral intent. The model proposes a cognitive–intuitive view of moral judgment and it describes how emotion regulation, perceived moral intensity, and perceived ethical climate constructs impact the formation of moral intent. The paper discusses the theories that link emotions to moral judgment and implications of the model for future research and its implication for managers.
Recently, society and the accounting profession have become increasingly concerned with ethics. Accounting researchers have responded by attempting to investigate and analyze the ethical behavior of accountants. While the current state of ethical behavior among practitioners is important, the ability of accountants to detect ethical problems that may not be obvious should also be studied and understood. This study addresses three questions: (1) are auditors alert to ethical issues; (2) if so, how important do they perceive them to be; and (3) what factors affect their sensitivity threshold and their perceptions of the importance of the issues?
Most of the prior research in accounting ethics presents subjects with scenarios that contain an obvious ethical issue, and subjects realize that they are participating in an ethics study. In the present study, the ethical problems are integrated into general accounting situations in order to discover the sensitivity of accounting professionals to them. This study defines ethical sensitivity as the ability to interpret a given situation and to realize that a moral problem exists.
CPAs responded to an experimental instrument comprised of three auditing scenarios taken from the 1989 Trueblood cases, adapted to deal with different ethical problems — tax evasion by a client, auditor independence, and a client's ethical problem which does not directly affect the audit. The accounting and/or auditing problems presented in the three cases were also different with the information relating to the possible ethical problem embedded in the situation. Multiway contingency tables were used to analyze the data.
Factors useful in predicting whether a subject will mention an ethical issue include the nature of the ethical issue, the issue's severity, and the subject's age. Employment position, expertise (measured by two proxies), prior exposure to a similar ethical issue and education level (undergraduate versus graduate) were not significant. The ethical issue itself was also a significant factor in determining the absolute importance given to the ethical issue.
Neuroethics, the study of the cognitive and neural mechanisms underlying ethical decision-making, is a growing field of study. In this review, we identify and discuss four themes emerging from neuroethics research. First, ethical decision-making appears to be distinct from other types of decision-making processes. Second, ethical decision-making entails more than just conscious reasoning. Third, emotion plays a critical role in ethical decision-making, at least under certain circumstances. Lastly, normative approaches to morality have distinct, underlying neural mechanisms. On the basis of these themes, we draw implications for research in business ethics and the practice of ethics training.
Purpose
– The aim of this exploratory research is to compare three sectors of the auditing profession – internal auditors, external auditors from larger international firms, and external auditors from smaller/regional firms – in regard to the influence of situational context on their ethically‐related decision‐making and judgment evaluations.
Design/methodology/approach
– Against the backdrop of five vignettes applied with a survey, the paper examines the potential influence of social consensus and magnitude of consequence on the ethical decision path of these three auditor groups.
Findings
– The paper finds that, in all cases, social consensus and magnitude of consequences exert influence on the ethical decision path. In the case of social consensus, however the paper finds that the ethical decision path is fully mediated for large firm auditors but is only partial mediated for the other two groups of auditors.
Originality/value
– This research examines responses from both internal and external auditors. Comparison between such groups is unique because these groups have not been well researched in the past literature.
The purpose of this paper is to synthesize the empirical research on auditors' ethical reasoning within a framework that considers cognitive development, individual characteristics and contextual factors. In so doing, we wish to facilitate an understanding of the extant literature and provide a basis for improving auditors; ethical reasoning.
The prevalence, age of onset, and symptomatology of many neuropsychiatric conditions differ between males and females. To understand the causes and consequences of sex differences it is important to establish where they occur in the human brain. We report the first meta-analysis of typical sex differences on global brain volume, a descriptive account of the breakdown of studies of each compartmental volume by six age categories, and whole-brain voxel-wise meta-analyses on brain volume and density. Gaussian-process regression coordinate-based meta-analysis was used to examine sex differences in voxel-based regional volume and density. On average, males have larger total brain volumes than females. Examination of the breakdown of studies providing total volumes by age categories indicated a bias towards the 18-59 year-old category. Regional sex differences in volume and tissue density include the amygdala, hippocampus and insula, areas known to be implicated in sex-biased neuropsychiatric conditions. Together, these results suggest candidate regions for investigating the asymmetric effect that sex has on the developing brain, and for understanding sex-biased neurological and psychiatric conditions.
Individuals' awarenessof moral issues is an important first step in the ethicaldecision-making process. Relying on research in social cognition andbusiness ethics, we hypothesized that moral awareness is influenced byissue-related factors (magnitude of consequences of the moral issueand issue framing in moral terms) and social contextrelated factors(competitive context and perceived social consensus that the issue isethically problematic). The hypotheses were tested in a fieldexperiment involving 291competitive intelligence practitioners.Results generally supported the hypotheses. Qualitative analysisyielded additional insights into the content of respondents' moralawareness.
Purpose
The purpose of this study is to investigate the impact of the presence of a code of ethics on the quality of auditors' judgments, within the context of the new International Standard on Quality Controls 1 (ISQC1).
Design/methodology/approach
A sample of 112 professional accountants and auditing students was employed to investigate the effect of the presence of a code of ethics (operationalised as the presence vs absence of an organisational code of conduct) on the quality of audit judgments, pertaining to an inventory writedown, using a 2 × 2 full factorial “between‐subjects” experimental design.
Findings
The results of this study indicate that the presence of a code of ethics has a positive impact on the quality of the judgments made by professional accountants, but not on students. This suggests that it is the code of ethics, in the context of greater general experience that leads to higher quality of judgments.
Practical implications
The results suggest that the requirements of ISQC1 are relevant to the quality control of accounting firms and have potential to positively impact the quality of audit performance.
Originality/value
This is the first paper to examine the impact of the presence of a code of ethics within an audit context. It is the first time that the interactive effects of the code of ethics and technical competency, which together form an integral part of standard‐setters' quality control standards, upon the quality of auditor judgments has been investigated.
Describes the objectives herein as examining auditors’ ethical sensitivity to assess risk of fraud in financial reporting. Gives background literature as the opening section, and this is followed by a section in which the investigation method is described, study results are then discussed, followed by a summary and conclusions. Looks at case studies of bribery scandals, etc. and discusses ethics and auditing. Sums up that ethical scenarios examined herein, perhaps, contain external economies - but not external diseconomies.
Existing theoretical models of individual ethical decision making in organizations place little or no emphasis on characteristics of the ethical issue itself. This article (a) proposes an issue-contingent model containing a new set of variables called moral intensity; (b) using concepts, theory, and evidence derived largely from social psychology, argues that moral intensity influences every component of moral decision making and behavior; (c) offers four research propositions; and (d) discusses implications of the theory.
The auditor's responsibility with respect to fraud has been one of
the issues which has been associated most persistently with questions
about the adequacy of audit performance. Examines the way in which the
position of the accountancy profession in Britain on this subject
developed during the 1980s – a period of considerable professional
activity with respect to the issue of the auditor and fraud. While the
profession has been persuaded to accept additional responsibilities
concerning the reporting of detected fraud, it is argued that no such
development has occurred with respect to the auditor's responsibilities
concerning fraud detection. The current nature of the auditor's duties
regarding fraud detection is seen as contestable. While further
government action may force the profession to assume additional
responsibilities in this respect, any such developments are seen as
needing more detailed investigation of the precise capacities of audit
practice in detecting (particularly management) fraud.
The measurement of age, age structuring, and the life course has become more problematic as the study of human lives has moved toward more detailed analyses and explanations. As we seek to better understand the course of human lives in contemporary and changing societies, the effective empirical measurement of its key concepts simultaneously becomes more pressing and more complicated. We first review the critical concepts of, and measurement strategies associated with, age and age structuring—including a discussion of different types of age, subjective age identification, age norms and age expectations, critical life events, life phases, and life review. We then discuss state-of-the-art methods for measuring the life course, especially through life history and event matrices, and we close the chapter with some comments on the organization, analysis, and modeling of data.
This study examines whether the presence of realistic, yet irrelevant, affective information differentially influences the professional judgments of more experienced and less experienced auditors. In this study, auditors with different experience levels were either provided or not provided with information designed to elicit a negative interpersonal emotional reaction towards a manufacturing client when making an inventory obsolescence risk judgment. The results indicate that the inventory obsolescence risk assessments of less experienced auditors were significantly higher when they were provided with negative affective information on a client than when no such information was provided. No such differences were found for the more experienced auditors. This study suggests that professional experience is one factor that influences individuals' assessments of the informational value of affective reactions. This has implications for developing effective training programs to increase professionals' awareness of the influence that emotional reactions can have on their judgment. Copyright © 2002 John Wiley & Sons, Ltd.
The experiment reported in this paper tests a theoretical model of experienced and novice auditors' information use. The model, based on social cognition research, posits that when judgements are sequential, the information encountered first affects the processing of subsequent information. Specifically, initial information that is in line with expectations results in more superficial processing of subsequent information than initial information that violates expectations. The judgements of 13 experienced and 26 novice auditors were analyzed to determine whether the model is descriptive of auditors' judgements in an ill-structured task setting (real estate valuation). Results lend support for the model. The implications of the results and the model's impact on audit effectiveness are discussed.
This paper examines the change in the average level of moral development over a 7.5-year period of promotion, attrition, and survival in five Big 6 firms. The study improves upon previous cross-sectional studies that found decreases in the average level of moral development at the senior manager and partner levels, which has been referred to as the "inverted-U" phenomenon. Problems with these studies that limit the generalizability of their findings include their cross-sectional nature and samples that usually come from one or two firms. Over a 7.5-year period, we found that the participating Big 6 firms retained auditors with higher average levels of moral development (measured using the defining issues test), while those with lower average levels left the firms. The average level of moral development for new partners was at least as high as the group from which they came. This research suggests that the concern about Big 6 firms retaining a higher proportion of auditors with lower moral development may be an artifact of research design.
Auditors encounter both relevant and irrelevant information during the performance of audit tasks. Prior studies have shown that the presence of irrelevant information weakens the impact of relevant information on auditors' judgments. Such studies, however, have not considered whether experience moderates the diluting effect of irrelevant information on auditors' judgments. This study reports the results of an experiment in which the effect of irrelevant information on the going-concern judgments of less experienced auditors -- audit seniors -- is compared to the effect of irrelevant information on the going-concern judgments of more experienced auditors -- audit managers and partners. The experiment re-affirms that irrelevant information does have a diluting effect on the judgments of audit seniors but provides new evidence that irrelevant information does not have a diluting effect on the judgments of audit managers and partners.
This study examines the impact of a range of demographic variables (gender, firm size, degree type, level of education, length of experience, age and work area) on ethical intentions, ethical judgement, perceived ethical intensity and perceived ethical culture. Cases containing information on four types of time pressure-induced auditor dysfunctional behaviours were distributed to trainee accountants attending a professional education programme of the Institute of Chartered Accountants in Ireland. The findings suggest that gender, firm size and degree type had a significant association with ethical decision making. These variables also had a significant association with perceived ethical intensity as did work area. Gender, firm size, level of education and length of experience showed evidence of a significant association with perceived ethical culture. Implications of the findings and areas for further research are discussed.
This research studies the influence of client integrity and competence and auditor cognitive style on fraud detection. The study was supported by five Big Six auditing firms with 152 managers and 342 seniors. The case study used in the research involves a restaurant client that materially overstated ending inventory (Pincus 1990). The subjects were randomly assigned to one of three groups for the client integrity and competence manipulation (high, low, and control). This research provides three important findings for the practice and theory of auditing. First, client integrity and competence did not affect the auditors' fraud detection ability except for high-moral-development managers. Second, managers outperformed seniors, but this difference was moderated by the manager's level of moral development. That is, high-moral-development managers detected fraud at a higher rate. Finally, the research validates Pincus (1990); fraud detection increases directly with an auditor's prior beliefs concerning the existence of fraud.
The current study surveys practising Canadian public accountants in Canada in both Big 4 and non-Big 4 firms to determine their orientation with respect to Machiavellianism, defined as ‘attending to one's interests much more than to others'. Results indicate that while there are no significant differences in Machiavellianism between public accountants in the upper-level positions (managers and partners), partners are significantly less Machiavellian than seniors. These results are consistent with previous studies on Canadian public accountants.
This study offers a theoretical framework of ethical behavior and a comparative analysis of ethical perceptions of managers of large, mostly publicly traded corporations (those with 1,000 or more employees) and the owners and managers of smaller companies (those with fewer than 100 employees) across 17 years. The primary research provides basic data on the changing standards of ethics as perceived by leaders of large and small businesses where the cultures frequently fall into sharp contrast. Our findings reveal the extent to which the message of business integrity is gaining or losing ground within large and small companies. It does this by means of respondents’ judgments of acceptable responses to 16 scenarios profiling common business situations with questionable ethical dimensions. Based on responses from over 5,000 managers and employees (from firms of all sizes) to our scenarios at three points in time (1985, 1993, 2001), we tested two research questions. First, for firms of all sizes, have business ethics improved or declined between the years 1985 and 2001? Second, comparing responses of large and small firm executives across the 1985–2001 time frame, is there a discernible difference in their ethical standards? Our results suggest that business leaders are making somewhat more ethical decisions in recent years. We also found that small business owner–managers offered less ethical responses to scenarios in 1993 but that no significant differences existed with large firm managers in 1985 and 2001. Implications of our findings are discussed.
This paper investigates whether gender affects ethically sensitive decisions of a personal or business nature. Data from 51 practicing accountants from both public accounting and private industry suggest that while differences exist between female and male accountants in responses to specific situations, overall responses are quite similar. Statistically significant differences were found for only five of the sixteen ethically sensitive situations. Further, when personal and business situations of a similar nature were paired together, two of the eight differences between personal and business responses were significantly different between females and males. Taken as a whole, the results refute the suggestion that the ethical decision making of organizations may be enhanced as more women enter the business field.
This study investigates the differences in individuals' ethical decision making between Canadian university business students and accounting professionals. We examine the differences in three measures known to be important in the ethical decision-making process: ethical awareness, ethical orientation, and intention to perform questionable acts. We tested for differences in these three measures in eight different questionable actions among three groups: students starting business studies, those in their final year of university, and professional accountants.
The measures of awareness capture the extent to which respondents felt that a particular action was unethical according to each of several ethical criteria. We found few differences between the two student groups on these measures, suggesting that their education had minimal effect on raising their awareness of the ethical issues in the vignettes. Indeed, overall, the graduating student's scores were marginally lower than those of the entry-level students. However, the professionals viewed some actions as significantly less ethical than did the graduating students.
The measures of ethical orientation capture the weight respondents placed on each of the criteria above in their evaluation of the overall morality of an action. The differences between the three groups were generally small, and were a function of the vignette, consistent with Jones' (1991) model of issue-contingent ethical reasoning.
The measures of intention capture the extent to which a respondent perceives that s/he would perform the action. There were significant differences between the groups in three of the eight vignettes, driven by a difference between the professionals and the other two student groups. The awareness measures were strong predictors of intention. We discuss the implications of these findings for professional training and future research.