Abstract
We contribute to the literature on intentions to report wrongdoing by examining whether Chinese internal auditors make consistent judgments when an ethical dilemma is presented in English and when the same dilemma is presented in Chinese. We invoke cultural frame switching theory, and our findings, which are based on a randomized experiment using between-subjects and within-subject mixed design, support the hypothesis that Chinese internal auditors are more likely to report wrongdoing when the ethical dilemma is presented in English than when it is presented in Chinese. Our results, which demonstrate that internal auditors make inconsistent ethical judgments in English and Chinese, point to language-triggered cognitive bias resulting from cultural mindsets. We suggest practical interventions and language strategies to improve audit quality.
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Data Availability
The data are available from the first author.
Notes
For example, PCAOB Auditing Standard No. 5 requires external auditors to consider the internal audit function’s work in assessing internal control effectiveness.
In China, Simplified Chinese is the official standard written language used in education and teaching in schools and universities, as well as in business. It is the second most important global business language (The World Bank, 2017). In our study, Chinese refers to Simplified Chinese, which is the native language of our participants. Accordingly, the Chinese version of our research instrument was developed in Simplified Chinese.
China is one of the USA’s top three trading partners (The U.S. Census Bureau, 2022). Chinese cross-listed firms in the USA have been valued at $US1.8 trillion (Forbes, 2020). Moreover, the linguistic distance index shows that Chinese and English represent the greatest difference in language families (Dow et al., 2016).
For example, Lee et al. (2010) show that Chinese students are more self-enhancing in rating themselves as better than others when their individualist mindset is made salient in English compared to when their collectivist mindset is made salient in Chinese. Furthermore, based on findings from four studies, Chen et al. (2014) consistently show that the predictive power of “dialectical thinking” on cultural orientations is stronger in Chinese than in English.
In a more recent study relating to business ethics, Taghavi and Segalla (2023) suggest that frame switching renders one set of cultural knowledge temporarily accessible when activated by situational cues. They provide evidence that religious stimuli interacted with cultural identity to predict work ethic using North African–French individuals.
For example, evidence shows that the presence of a Code of Ethics has a positive impact on the quality of judgments made by auditors, but not on students (Pfugrath et al., 2007). Holthoff et al. (2015) suggest future research involving accounting practitioners to examine topics relating to fraud and litigation cases.
Consistent with the literature in cross-cultural psychology (Bond, 1991; Harrison and McKinnon, 1999; Patel, 2006), our use of the concept of individualist versus collectivist societies refers not only to Hofstede’s (1980, 2011) cultural dimension of individualism versus collectivism but also captures perceptions of acceptable cultural norms and behavior (Bik and Hooghiemstra, 2018; Harrison, 1992; Harrison and McKinnon, 1999).
Consistently, evidence also shows that individuals in individualist cultures, such as the United States and Australia, are more positive towards reporting wrongdoing than individuals in collectivist cultures, such as India, Malaysia, and Croatia (e.g., Arnold et al., 2007; Lee et al., 2019; Nayir and Herzig, 2012; Park et al., 2005; Sims, 2009; Tavakoli et al., 2003; Zheng et al., 2019).
We acknowledge that prior studies have identified that individuals’ intentions to report wrongdoing may also be affected by organizational characteristics, such as whether organizations protect employees from possible retaliation for reporting wrongdoing and provide anonymous reporting channels (see Lee and Xiao, 2018 for a summary of factors that influence reporting accounting- and auditing-related wrongdoing). It is not possible to include all specific factors because many of these are correlated with the three mediating factors in our model, which may potentially threaten the validity of the theoretical model. Therefore, we applied Graham’s (1986) and Schultz et al.’s (1993) theoretical model, which captures individuals’ “psychological state” (Graham, 1986, p. 39) related to their intentions to report wrongdoing when using English versus Chinese.
We adopted the third-person approach to reduce possible “moral muteness,” whereby individuals are hesitant to discuss their own ethics (Ramsey et al., 2007, p. 197). Specifically, our scenario presented an ethical dilemma relating to reporting a wrongdoing by a third person and posited a decision made by that person. Participants were then required to evaluate this third person’s decision in the scenario. Prior research suggests that the formulation of the scenario in the third person rather than the first person can largely free participants from the need to state their own responses to whether to report the wrongdoing in the scenario, thereby reducing their felt pressure to provide a socially desirable response (Lowe et al., 2015; Patel and Millanta, 2011).
While linguistic equivalence is important in developing research instruments, direct translation may make translated texts difficult to understand, which potentially affects how participants respond to the research instrument (Evans et al., 2015; Kocbek, 2008; Laaksonen, 2021). To address this limitation, we applied the translation and back-translation method and the committee method (e.g., Brislin, 1986; Kamala and Komori, 2018) in developing the research instrument in English and Chinese to achieve the best possible cultural fit and linguistic equivalence. We acknowledge that there may be minor discrepancies in the English and Chinese versions of our research instrument, which is a possible limitation of our study.
This is because the College English Test (CET) in Band 4 is compulsory to meet the requirements for bachelor or higher degrees in China. The CET is a national examination that measures individuals’ English proficiency in mainland China.
We conducted pre-experimental interviews in English with 30 randomly selected internal auditors during the recruitment phase. Consistent with Benet-Martínez and Haritatos (2005) and Chen et al. (2014), we asked questions about participants’ English exposure within and outside the workplace, such as “How much do you use English in your workplace?” and “How often do you watch TV shows or movies in English?” Participants were also asked questions relating to their experience of internal auditing practice, such as “How many years have you been an internal auditor?” and “To whom do you report when you are aware of irregularities?”.
Eight participants’ responses in both languages were excluded from the data analysis because the majority of the required information was not provided, or they provided inconsistent demographic information in English and Chinese.
The majority of our participants were junior internal auditors because they met the stringent language requirements to complete the experimental tasks. Compared to senior internal auditors and others in higher positions, junior internal auditors have greater exposure to English language environments.
Statement 1 and statement 2 relate to the collectivist and interdependent cultural mindset. For each statement, the mean score of participants’ responses in Chinese is significantly higher than the mean score in English (statement 1: Chinese mean = 6.16 vs. English mean = 5.91; statement 2: Chinese mean = 4.56 vs. English mean = 4.13), indicating that participants’ collectivist and interdependent cultural mindset was more accessible in Chinese.
Statement 3 and statement 4 relate to the individualist and independent cultural mindset. For each statement, the mean score of participants’ responses in English is significantly higher than the mean score in Chinese (statement 3: English mean = 4.49 vs. Chinese mean = 3.96; statement 4: English mean = 5.09 vs. Chinese mean = 3.97), indicating that participants’ individualist and independent cultural mindset was more accessible in English.
Our robustness tests controlling gender, age, professional experience, qualifications, existence of the Code of Ethics, size of organization, participants’ evaluation of realism and understandability of the scenario, as well as the distributing sequences of the research instrument produce consistent results with those from the main analyses.
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Acknowledgements
We thank Professor Graeme Harrison, Professor Nonna Martinov-Bennie, Professor Patrick Garcia, Professor Grant Richardson, Professor Shiqiao Zheng, Professor Christian Nielsen, Professor Yingfei Liu, Dr Bella Zheng, Professor Huayun Zhai, Professor Noriyuki Tsunogaya, Professor Qingliang Tang, Professor Simone Scagnelli, Professor Milind Sathye, Ms Angela Yu, Professor Stella Huiying Wu, Dr Steven Wu, Dr Sammy Ying and Dr Andreas Hellmann for their helpful comments and suggestions. We gratefully acknowledge the support from Macquarie University and Nanjing Audit University.
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Pan, P., Patel, C. Do Internal Auditors Make Consistent Ethical Judgments in English and Chinese in Reporting Wrongdoing?. J Bus Ethics (2024). https://doi.org/10.1007/s10551-024-05629-8
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DOI: https://doi.org/10.1007/s10551-024-05629-8