Effects of materiality, risk, and ethical perceptions on fraudulent reporting by financial executives
David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Jack Alan Reynolds
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Journal of Business Ethics 38 (3):243 - 262 (2002)
This paper examines fraudulent financial reporting within the context of Jones' (1991) ethical decision making model. It was hypothesized that quantitative materiality would influence judgments of the ethical acceptability of fraud, and that both materiality and financial risk would affect the likelihood of committing fraud. The results, based on a study of CPAs employed as senior executives, provide partial support for the hypotheses. Contrary to expectations, quantitative materiality did not influence ethical judgments. ANCOVA results based on participants' estimates of the likelihood that a "typical CPA" would manipulate reported results indicated that both materiality and risk significantly influenced the likelihood of fraud, but that the perceived morality of the action did not. In contrast, results based on participants' self-reported behavior indicated that materiality and the perceived morality of the action would influence the likelihood of fraud, but that financial risk would not. Regardless of the measure used for the likelihood of fraud, the results indicate that financial executives continue to be influenced by quantitative materiality when misstatements are clearly material on qualitative grounds.
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Citations of this work BETA
Eric W. Stein & Norita Ahmad (2009). Using the Analytical Hierarchy Process (Ahp) to Construct a Measure of the Magnitude of Consequences Component of Moral Intensity. Journal of Business Ethics 89 (3):391 - 407.
Darlene Bay & Alexey Nikitkov (2011). Subjective Probability Assessments of the Incidence of Unethical Behavior: The Importance of Scenario–Respondent Fit. Business Ethics 20 (1):1-11.
Peter E. Mudrack & E. Sharon Mason (2013). Ethical Judgments: What Do We Know, Where Do We Go? [REVIEW] Journal of Business Ethics 115 (3):575-597.
Peter E. Mudrack & E. Sharon Mason (2013). Dilemmas, Conspiracies, and Sophie's Choice: Vignette Themes and Ethical Judgments. Journal of Business Ethics 118 (3):639-653.
Subrata Chakrabarty (2014). The Influence of Unrelated and Related Diversification on Fraudulent Reporting. Journal of Business Ethics:1-18.
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