The Impact of Ethical Leadership, the Internal Audit Function, and Moral Intensity on a Financial Reporting Decision
Graduate studies at Western
Journal of Business Ethics 109 (3):351-366 (2012)
|Abstract||Two elements of corporate governance—the strength of ethical executive leadership and the internal audit function (IAF hereafter)—provide guidance to accounting managers making decisions involving uncertainty. We examine the joint effect of these two factors, manipulated at two levels (strong, weak), in an experiment in which accounting professionals decide whether to book a questionable journal entry (i.e., a journal entry for which a reasonable business case can be made but there is no supporting documentation). We find that ethical leadership and the IAF interact to determine the likelihood that accountants book the entry. Specifically, accountants are less likely to book a questionable journal entry when there is a weak ethical leader and a strong IAF compared to all other conditions. In addition, we find that accountants question the appropriateness and ethicalness of the request to book an undocumented journal entry more in the weak ethical leader and strong IAF condition than in the other conditions. These results suggest that the IAF has a different impact on financial reporting decisions depending on the ethicalness of executive leadership and that a strong IAF may cause accountants to question the appropriateness and ethicalness of an undocumented journal entry when combined with weak ethical leadership. We also find that the interactive effect of ethical leadership and the IAF on an accountant’s decision is fully mediated by his/her perception of the moral intensity of the issue. Thus, accountants, who perceive greater moral intensity associated with booking the entry, are less willing to do so.|
|Keywords||Ethics in accounting Moral intensity Ethical leadership Moral action Internal audit function Financial reporting|
|Categories||categorize this paper)|
|Through your library||Configure|
Similar books and articles
Kanika T. Bhal & Anubha Dadhich (2011). Impact of Ethical Leadership and Leader–Member Exchange on Whistle Blowing: The Moderating Impact of the Moral Intensity of the Issue. [REVIEW] Journal of Business Ethics 103 (3):485-496.
Kleio Akrivou, Dimitrios Bourantas, Shenjiang Mo & Evi Papalois (2011). The Sound of Silence – A Space for Morality? The Role of Solitude for Ethical Decision Making. Journal of Business Ethics 102 (1):119-133.
Carla Millar & Eve Poole (eds.) (2010). Ethical Leadership: Global Challenges and Perspectives. Palgrave Macmillan.
Jeanette Ng, Gregory P. White, Alina Lee & Andreas Moneta (2009). Design and Validation of a Novel New Instrument for Measuring the Effect of Moral Intensity on Accountants' Propensity to Manage Earnings. Journal of Business Ethics 84 (3):367 - 387.
Sean Valentine & David Hollingworth (2012). Moral Intensity, Issue Importance, and Ethical Reasoning in Operations Situations. Journal of Business Ethics 108 (4):509 - 523.
Michael E. Brown (2010). Do Ethical Leaders Get Ahead? Business Ethics Quarterly 20 (2):215-236.
Georges Enderle (1987). Some Perspectives of Managerial Ethical Leadership. Journal of Business Ethics 6 (8):657 - 663.
Patricia C. Kelley & Dawn R. Elm (2003). The Effect of Context on Moral Intensity of Ethical Issues: Revising Jones's Issue-Contingent Model. [REVIEW] Journal of Business Ethics 48 (2):139 - 154.
Joseph G. P. Paolillo & Scott J. Vitell (2002). An Empirical Investigation of the Influence of Selected Personal, Organizational and Moral Intensity Factors on Ethical Decision Making. Journal of Business Ethics 35 (1):65 - 74.
Elaine F. Tombaugh (2009). Can Spiritual Leadership Lead Us Not Into Temptation? Business and Professional Ethics Journal 28 (1/4):95-119.
Lora L. Reed, Deborah Vidaver-Cohen & Scott R. Colwell (2011). A New Scale to Measure Executive Servant Leadership: Development, Analysis, and Implications for Research. [REVIEW] Journal of Business Ethics 101 (3):415-434.
Tina D. Carpenter & Jane L. Reimers (2005). Unethical and Fraudulent Financial Reporting: Applying the Theory of Planned Behavior. [REVIEW] Journal of Business Ethics 60 (2):115 - 129.
Patricia Casey Douglas, Ronald A. Davidson & Bill N. Schwartz (2001). The Effect of Organizational Culture and Ethical Orientation on Accountants' Ethical Judgments. Journal of Business Ethics 34 (2):101 - 121.
Mohammad J. Abdolmohammadi, William J. Read & D. Paul Scarbrough (2003). Does Selection-Socialization Help to Explain Accountants' Weak Ethical Reasoning? Journal of Business Ethics 42 (1):71 - 81.
Daniel E. Palmer (2009). Business Leadership: Three Levels of Ethical Analysis. [REVIEW] Journal of Business Ethics 88 (3):525 - 536.
Added to index2011-12-14
Total downloads4 ( #189,469 of 740,480 )
Recent downloads (6 months)1 ( #61,957 of 740,480 )
How can I increase my downloads?