Abstract
The goal of this study was to construct a valid new instrument to measure the effect of moral intensity on managers’ propensity to manage earnings. More specifically, this study is a pilot study of the impact of moral intensity on financial accountants’ propensity to manage earnings. The instrument, once validated, will be used in a full-study of managers in the hotel industry. Different ethical scenarios were presented to respondents in the survey; each ethical scenario was designed in both high or low moral intensity form, to reflect the importance of the moral dilemma at hand. The results were analysed by factor analysis. The findings of this study have positively validated the instrument, with three of the five moral intensity components identified as having appropriate eigenvalues. This indicates that they have a significant influence in the study. The first factor captures the social consensus dimension and one scenario of the proximity dimension. The second factor indicates an interaction between the temporal immediacy and the magnitude of consequences dimension. The third dimension is probability of effect and one scenario of the proximity dimension. In addition, t-tests indicated that the manipulation of high and low conditions within each scenario were also successful. One limitation of the study might be the use of undergraduate accounting students as manager proxies, although prior evidence suggests use of accounting students as proxies is a valid approach in this type of study. This is a highly novel project as most prior studies have focussed on moral intensity and the general ethical decision-making process.
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Appendix one
Appendix one
There are two versions of the questionnaire, comprising 10 scenarios per questionnaire. Version A incorporated the high and control conditions for each of the scenarios and version B the low and control conditions. Respondents were randomly selected to receive either version A or B of the questionnaire.
Section A – please circle your response
Scenario #1
It is ‹The Addams Family Hotel’s’ (a four star hotel) last month of the budget year. The executive housekeeper, Mrs. Lurch ordered $50,000 worth of linen which was delivered within that period although it was not urgently required. Payment for the linen was required within 14 days of the invoice. This order should not have taken place as Mr. Fester, the General Manager, and Gomez, the Financial Controller, had informed all department heads that no discretionary expenses should be incurred till the following budget year. Normal accounting procedure requires the invoice to be recorded as an expense when the linen is delivered. On learning what had happened, Mr. Fester asked Gomez not to record the invoice until the following year. This would ensure that their targeted numbers of the hotel for the year would still be achieved.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
Gomez, a qualified accountant, is married to Morticia, and they have a baby girl, Wednesday.
If you were in Gomez’s position, you would
1 | Record without hesitation |
2 | Record with some hesitation |
3 | Record with hesitation |
4 | Undecided |
5 | Delay recording with hesitation |
6 | Delay recording with some hesitation |
7 | Delay recording without hesitation |
Condition 2 (high condition contained in version A)
Gomez is a qualified accountant with five years experience, and has been the financial controller for two and a half months. As he is fast approaching the end of his three-month probationary period, he is anxious to do well as he and his wife, Morticia have just had a baby girl, Wednesday, and recently signed a mortgage for a bigger house.
If you were in Gomez’s position, you would
1 | Record without hesitation |
2 | Record with some hesitation |
3 | Record with hesitation |
4 | Undecided |
5 | Delay recording with hesitation |
6 | Delay recording with some hesitation |
7 | Delay recording without hesitation |
Condition 3 (low condition contained in version B)
Gomez, the financial controller, is a qualified accountant with five years experience, and has been with the hotel, for the last four years. He, and his wife, Morticia, have just had a baby girl, Wednesday, and recently signed a mortgage for a bigger house.
If you were in Gomez’s position, you would
1 | Record without hesitation |
2 | Record with some hesitation |
3 | Record with hesitation |
4 | Undecided |
5 | Delay recording with hesitation |
6 | Delay recording with some hesitation |
7 | Delay recording without hesitation |
Scenario #2
Hotel Camelot has a restaurant called Guinevere’s Place, which exists to service hotel guests. During the year-end physical inventory performed on Guinevere’s Places’ food items, the Financial Controller, Arthur and the General Manager, Merlin, were informed by the chef, Malory, that approximately $15,000 worth of food in the kitchen was identified as unusable and needed to be written off. Items such as Shitake mushrooms in the storeroom would have to be written off as they had not been properly stored, processed food items gone past their expiry dates, and some meat products in the freezer, whose purchase dates could not be ascertained. This problem was a result of a change in head chefs during the year, as information on what was kept in the storage facilities is often not passed on to the new chefs.
Merlin, along with the managing agent for the hotel, was concerned with fulfilling the budgeted numbers as personal bonuses were at stake. Merlin wanted to reduce the impact on the profit figure and asked Arthur to only write off 10% of the original amount, i.e. $1,500.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and␣B)
If you were in Arthur’s position, you would
1 | Agree without hesitation |
2 | Agree with some hesitation |
3 | Agree with major hesitation |
4 | Undecided |
5 | Disagree with major hesitation |
6 | Disagree with some hesitation |
7 | Disagree without hesitation |
Condition 2 (high condition contained in version A)
Arthur was concerned about his standing with Merlin and the managing agent, and felt the need to ensure that they were happy with his work performance to ensure his job security. Job security was of an issue for Arthur as the hotel had a reputation for changing financial controllers when they were unable to achieve their set goals.
If you were in Arthur’s position, you would
1 | Agree without hesitation |
2 | Agree with some hesitation |
3 | Agree with major hesitation |
4 | Undecided |
5 | Disagree with major hesitation |
6 | Disagree with some hesitation |
7 | Disagree without hesitation |
Condition 3 (Low condition contained in version B)
Arthur was concerned about his standing with Merlin and the managing agent, job security was of an issue for Arthur as the hotel had a reputation for changing financial controllers when they were unable to achieve their set goals.
If you were in Arthur’s position, you would
1 | Agree without hesitation |
2 | Agree with some hesitation |
3 | Agree with major hesitation |
4 | Undecided |
5 | Disagree with major hesitation |
6 | Disagree with some hesitation |
7 | Disagree without hesitation |
Scenario #3
Marcia, the Financial Controller of ‹The Brady Hotel’, was reviewing the hotel’s accounts and discovered an over-accrual in one of the accounts. It␣was determined that the over-accrual was due to an error in the spreadsheet formula. Total amount concerned: $25,000. However, as budgeted profit figures are still being achieved, Marcia ignores the␣error as it means that in the event that it was needed to achieve profit figures in a bad month, there would be sufficient amounts in the balance sheet.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
Marcia is concerned that the auditors will note the over-accrual in their audit.
If you were in Marcia’s position, you would
1 | Reverse immediately without concern |
2 | Reverse immediately with some concern |
3 | Reverse immediately with major concerns |
4 | Undecided |
5 | Not reverse with major concerns |
6 | Not reverse with some concern |
7 | Not reverse without concern |
Condition 2 (high condition contained in version A)
It is two months before the hotel closes the accounts for the year, and Marcia is concerned about the possibility that the auditors will note the over-accrual in their audit.
If you were in Marcia’s position, you would
1 | Reverse immediately without concern |
2 | Reverse immediately with some concern |
3 | Reverse immediately with major concerns |
4 | Undecided |
5 | Not reverse with major concerns |
6 | Not reverse with some concern |
7 | Not reverse without concern |
Condition 3 (low condition contained in version B)
It is six months before the hotel closes the accounts for the year, and Marcia is concerned about the possibility that the auditors will note the over-accrual in their audit.
If you were in Marcia’s position, you would
1 | Reverse immediately without concern |
2 | Reverse immediately with some concern |
3 | Reverse immediately with major concerns |
4 | Undecided |
5 | Not reverse with major concerns |
6 | Not reverse with some concern |
7 | Not reverse without concern |
Scenario #4
Springfield Hotel, a service apartment hotel, is one month away from achieving target budget numbers. Mr. Burns, the General Manager, and the Financial Controller, Marge have stressed repeatedly to all department managers to control and watch spending within their departments. However, the Business Development Manager, Moe, had already committed to a Christmas radio special promoting the hotel for the holiday period. He had somehow neglected to inform Mr. Burns or Marge about this commitment. The radio station has invoiced the hotel for this radio promotion in December, and proper accounting procedures, requires Marge to record the expense in December. Mr. Burns is aware that without this expense, the hotel has just managed to achieve the target budget numbers, therefore, doing so would jeopardize that possibility. He instructs Marge not to record the expense in December.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
Marge spends the next few days thinking about it. If you were in Marge’s position, you would
1 | Agree without hesitation |
2 | Agree with some hesitation |
3 | Agree with major hesitation |
4 | Undecided |
5 | Disagree with major hesitation |
6 | Disagree with some hesitation |
7 | Disagree without hesitation |
Condition 2 (high condition contained in version A)
Marge checks with five other controllers in other hotels within the same chain, who advise that it is not the right thing to do.
If you were in Marge’s position, you would
1 | Agree without hesitation |
2 | Agree with some hesitation |
3 | Agree with major hesitation |
4 | Undecided |
5 | Disagree with major hesitation |
6 | Disagree with some hesitation |
7 | Disagree without hesitation |
Condition 3 (low condition contained in version B)
Marge checks with five other controllers in other hotels within the same chain, who give mixed advice.
If you were in Marge’s position, you would
1 | Agree without hesitation |
2 | Agree with some hesitation |
3 | Agree with major hesitation |
4 | Undecided |
5 | Disagree with major hesitation |
6 | Disagree with some hesitation |
7 | Disagree without hesitation |
Scenario #5
‹The Dean Hotel’ is being sued by a former manager-level employee, Felicity, for wrongful dismissal to the amount of $500,000. The financial controller of the hotel, Ben, has been informed by their legal counsel that Felicity has offered to settle the lawsuit for $200,000. The settlement is being considered as there is a strong probability that the hotel will not succeed in this lawsuit.
All managers in the hotel, including Ben, are entitled to a bonus, upon achievement of financial targets. Ben is a young controller who is hoping to transfer to a larger hotel within the chain, in the next six months, and he is aware that he has to maintain good standing among his peers.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
A trial date has been set for the following month, if you were in Ben’s position, you would
1 | Settle without hesitation |
2 | Settle with some hesitation |
3 | Settle with major hesitation |
4 | Undecided |
5 | Delay settlement with major hesitation |
6 | Delay settlement with some hesitation |
7 | Delay settlement without hesitation |
Condition 2 (high condition contained in version A)
The trial will not occur for another six months. If you were in Ben’s position, you would
1 | Settle without hesitation |
2 | Settle with some hesitation |
3 | Settle with major hesitation |
4 | Undecided |
5 | Delay settlement with major hesitation |
6 | Delay settlement with some hesitation |
7 | Delay settlement without hesitation |
Condition 3 (low condition contained in version B)
The trial will not occur for another year, with an appeal process which could take several years.
If you were in Ben’s position, you would
1 | Settle without hesitation |
2 | Settle with some hesitation |
3 | Settle with major hesitation |
4 | Undecided |
5 | Delay settlement with major hesitation |
6 | Delay settlement with some hesitation |
7 | Delay settlement without hesitation |
Scenario #6
Henry Blake, the Financial Controller of Hotel Mash is keen to meet budgeted figures this year. To do so, there is a need to bring forward the invoice cut off date a day or more to reduce the amount of expenses being recorded for the period. The more the cut off date is brought forward, the greater the probability of alerting the auditors of incomplete representation of expenses for the month.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
To achieve his financial target, Henry has␣an option to bring forward the invoice cut off date a day. If you were in Henry’s position, you would
1 | Bring forward without hesitation |
2 | Bring forward with some hesitation |
3 | Bring forward with major hesitation |
4 | Undecided |
5 | Not bring forward with major hesitation |
6 | Not bring forward with some hesitation |
7 | Not bring forward without hesitation |
Condition 2 (high condition contained in version A)
Henry will achieve his financial target if he brings forward the invoice cut off date by as much as three weeks.
If you were in Henry’s position, you would
1 | Bring forward without hesitation |
2 | Bring forward with some hesitation |
3 | Bring forward with major hesitation |
4 | Undecided |
5 | Not bring forward with major hesitation |
6 | Not bring forward with some hesitation |
7 | Not bring forward without hesitation |
Condition 3 (low condition contained in version B)
Henry will achieve his financial target if he brings forward the invoice cut off date by as much as one week.
If you were in Henry’s position, you would
1 | Bring forward without hesitation |
2 | Bring forward with some hesitation |
3 | Bring forward with major hesitation |
4 | Undecided |
5 | Not bring forward with major hesitation |
6 | Not bring forward with some hesitation |
7 | Not bring forward without hesitation |
Scenario #7
The General Manager, Mr. Kramer, of Hotel New York has been informed that he will be transferring to another hotel within the group, in the following financial year. He is keen to meet budgeted figures␣this year as his bonus is dependent on it. Mr.␣Kramer’s intention is to ensure that the budgeted numbers are met, without any concern that it will impact the hotel owners in the following year. Mr.␣Kramer wants Elaine, the Financial Controller to ignore all invoices till after the year end is complete. This entails Elaine bringing forward the invoice cut-off date by three weeks, which will not be representative of the hotel expenses. Included in these invoices are costs of hotel advertising which has boosted the current month’s room and food revenue, recruitment cost for the new marketing manager, etc.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
Elaine is only temporarily assigned to assist in the hotel until the new Financial Controller starts in the role in a month’s time.
If you were in Elaine’s position, you would
1 | Ignore without hesitation |
2 | Ignore with some hesitation |
3 | Ignore with major hesitation |
4 | Undecided |
5 | Not ignore with major hesitation |
6 | Not ignore with some hesitation |
7 | Not ignore without hesitation |
Condition 2 (high condition contained in version A)
Elaine is employed by the owners of the hotel and reports directly to them.
If you were in Elaine’s position, you would
1 | Ignore without hesitation |
2 | Ignore with some hesitation |
3 | Ignore with major hesitation |
4 | Undecided |
5 | Not ignore with major hesitation |
6 | Not ignore with some hesitation |
7 | Not ignore without hesitation |
Condition 3 (low condition contained in version B)
Elaine is employed by the managing agent for the hotel and reports directly to them.
If you were in Elaine’s position, you would
1 | Ignore without hesitation |
2 | Ignore with some hesitation |
3 | Ignore with major hesitation |
4 | Undecided |
5 | Not ignore with major hesitation |
6 | Not ignore with some hesitation |
7 | Not ignore without hesitation |
Scenario #8
The Streets Hotel is considering upgrading the computers in all 240 rooms. The hotel has two options; to make a capital investment, or to lease the computers from a local supplier. The Financial Controller, Ernie, has been advised that leasing the computers would be a better option, as it ensures that guests would always have a more reliable machine to work with. Leasing, however, would be classified as an operating expense, and thus have an impact on the bottom line. Ernie has been asked to make a recommendation.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
If you were in Ernie’s position, you would
1 | Lease without hesitation |
2 | Lease with some hesitation |
3 | Lease with major hesitation |
4 | Undecided |
5 | Make capital investment with major hesitation |
6 | Make capital investment with some hesitation |
7 | Make capital investment without hesitation |
Condition 2 (high condition contained in version A)
As the Streets Hotel is an owned hotel, upon discussions with the owner of the hotel, Bert, who was also his closest friend, it was established that Bert preferred not to incur the capital investment.
If you were in Ernie’s position, you would
1 | Lease without hesitation |
2 | Lease with some hesitation |
3 | Lease with major hesitation |
4 | Undecided |
5 | Make capital investment with major hesitation |
6 | Make capital investment with some hesitation |
7 | Make capital investment without hesitation |
Condition 3 (low condition contained in version B)
As the Streets Hotel is managed by an international group of hotels, upon discussions with the managing agent, it was established that purchasing the computers would be more ideal as it would have a smaller impact on the bottom line.
If you were in Ernie’s position, you would
1 | Lease without hesitation |
2 | Lease with some hesitation |
3 | Lease with major hesitation |
4 | Undecided |
5 | Capital purchase with major hesitation |
6 | Capital purchase with some hesitation |
7 | Capital purchase without hesitation |
Scenario #9
Nearing December, the end of the financial year, James, the Financial Controller and Bond, the General Manager of ‹Hotel Seven’ noted that they were just short of making the year’s budget. Their bonuses are tied to the hotel achieving its budget. There is a conference worth $30,000 to be recognised as revenue, however, the conference delegates arrive on the 31st of December and depart on the 8th of January, with meals catered daily. Bonus will only be achieved if the conference revenue is recognised in full.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
Assuming the hotel has already achieved its budget, if you were in James’s position, you would
1 | Recognise without hesitation |
2 | Recognise with some hesitation |
3 | Recognise with major hesitation |
4 | Undecided |
5 | Not recognise with major hesitation |
6 | Not recognise with some hesitation |
7 | Not recognise without hesitation |
Condition 2 (high condition contained in version A)
In order for budget to be met, full conference revenue will need to be recognised. If you were in James’s position, you would
1 | Recognise without hesitation |
2 | Recognise with some hesitation |
3 | Recognise with major hesitation |
4 | Undecided |
5 | Not recognise with major hesitation |
6 | Not recognise with some hesitation |
7 | Not recognise without hesitation |
Condition 3 (low condition contained in version B)
In order for budget to be met, four days of revenue will need to be recognised. If you were in James’s position, you would
1 | Recognise without hesitation |
2 | Recognise with some hesitation |
3 | Recognise with major hesitation |
4 | Undecided |
5 | Not recognise with major hesitation |
6 | Not recognise with some hesitation |
7 | Not recognise without hesitation |
Scenario #10
After a meeting with the top management, it was understood that if Hotel Ling did not meet the budgeted figures for a second year running, there would be a need to cut back on full time staff, to try to reduce the current overhead cost. It has been suggested that the hotel rely on casual staff, as that would allow for more flexibility in meeting the budget. Most full time staff would then have to look for alternate employment as casual employment does not suit their needs.
The Financial Controller, Ally, is considering delaying the recording of a large advertising expense, to try to achieve the budgeted figure for the last month of the budgeted year.
Please consider each of the following conditions independently of one another for each scenario
Condition 1 (control condition contained in versions A and B)
If Ally does not do so, it could end up costing the jobs of an unidentified number of full time employees in the hotel.
If you were in Ally’s position, what decision would you make?
1 | Record without concern |
2 | Record with some concern |
3 | Record but with major concerns |
4 | Undecided |
5 | Delay recording with major concerns |
6 | Delay recording with some concern |
7 | Delay recording without concern |
Condition 2 (high condition contained in version A)
If Ally does not do so, it could end up costing the jobs of most of the full time employees in the hotel. If you were in Ally’s position, what decision would you make?
1 | Record without concern |
2 | Record with some concern |
3 | Record but with major concerns |
4 | Undecided |
5 | Delay recording with major concerns |
6 | Delay recording with some concern |
7 | Delay recording without concern |
Condition 3 (low condition contained in version B)
If Ally does not do so, it could end up costing the job of a few full time employees in the hotel.
If you were in Ally’s position, you would
1 | Record without concern |
2 | Record with some concern |
3 | Record but with major concerns |
4 | Undecided |
5 | Delay recording with major concerns |
6 | Delay recording with some concern |
7 | Delay recording without concern |
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Ng, J., White, G.P., Lee, A. et al. Design and Validation of a Novel New Instrument for Measuring the Effect of Moral Intensity on Accountants’ Propensity to Manage Earnings. J Bus Ethics 84, 367–387 (2009). https://doi.org/10.1007/s10551-008-9714-3
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DOI: https://doi.org/10.1007/s10551-008-9714-3