Abstract
Accounting professionals play an important role in the generation and auditing of financial statements and, given their understanding of business processes, may be relied upon in the development of organizations’ ethical infrastructures (i.e., the formal aspects of an organization’s ethical environment that are explicitly under the control of the organization). Thus, understanding and improving the work environments of accounting professionals is crucial to improving organizational ethical culture and reducing fraud. In this study, we extend prior research that documents the prevalence of ethical infrastructure programs by assessing how accounting professionals, a key employee group, perceive their organizations’ ethical infrastructures. In addition, we examine whether perceptions of the effectiveness of the ethical infrastructure and professional autonomy influence accountants’ ethical judgments. Based on the responses of 378 CPAs in the United States, we find the perceived state of the ethical infrastructure across accounting work environments—both public accounting firms and other organization types—is relatively strong. However, of the five ethical infrastructure components we examine (i.e., ethics code, ethics training, ethics-based punishments and incentives, ethics reporting system, and ethics review system), only 35% of respondents indicate that their organizations have more than three of these components. Importantly, we find that perceived ethical infrastructure effectiveness and professional autonomy influence both perceptions of the ethical culture and the ethical judgments of accounting professionals. We also contribute to practice by highlighting opportunities for improvement in ethics training formats, ethics-based incentives, and ethics review systems.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
This study focuses on unethical behavior that is specific to the accounting function (i.e., financial statement fraud and client confidentiality). We leave investigation of other employee groups’ behaviors to future research.
Professionalism may be especially influential on the ethical behavior of accountants relative to other organizational members due to the sensitive information that accountants often handle and the resulting need for professional integrity and discretion, which exceeds traditional morality. However, professionalism may be less relevant to organizational decision-makers who are not part of a formal profession as defined by Wilensky (1964).
While we focus on accounting work environments due to the relative importance of accounting functions in the economy, more broad business research is often applicable and provides additional insights into the ethical environments of organizations when accounting-specific research is not available. As such we cite both accounting and non-accounting-specific research with an emphasis on accounting-specific information when available.
Each of the components of the ethical infrastructure are easily identified and separable from other components of the ethical infrastructure. This is in contrast with more implicit and harder to observe aspects of the ethical environment, such as tone at the top (e.g., Sweeney et al., 2010) and ethical climate orientation (e.g., Victor and Cullen, 1988). Further, the components of the ethical infrastructure are more easily modified by management (e.g., by implementing an ethics training program) than changing one of these implicit aspects of an ethical environment.
Mandatory ethics training also increased in prevalence in the wake of the Enron/Arthur Anderson scandals. We examine both state-mandated and organization-provided ethics training.
One possible issue with incentivizing ethical behavior is the difficulty in identifying and measuring ethical behavior. However, consistent with the previous research advocating for ethics-based incentives, we include ethics-based incentives as an element of a developed ethical infrastructure and examine empirically whether these systems are salient and perceived to be effective by the respondents in our study.
The instrument was designed to apply to each respondent’s self-selected organization type. Specifically, respondents in public accounting firms were asked questions about their firms (e.g., “Does your firm have a code of ethics…”). Respondents in OOTs received questions with “organization” instead of “firm” (e.g., “Does your organization have a code of ethics…”). Respondents in governmental organizations additionally received instructions that the term “organization” referred to “the specific agency or segment of government where you work.” Some questions were also modified slightly to apply to OOT respondents. For example, instead of the regional—Big 4 firm size question presented to public accounting respondents, OOT respondents were asked about the approximate number of employees in their organization.
While ethical standards regarding client confidentiality can be unclear in certain situations involving criminal activity, the tax scenario does not involve a criminal action and thus the client confidentiality standard in this case is unambiguous.
A detailed analysis of these comments is provided in Appendix 2.
Although the respondents are licensed in the state of Florida, email addresses and comments indicate that many respondents are working in other states. The instrument was also pilot tested with 92 alumni of a Master of Accountancy program at a state university. The study was approved by the university’s Institutional Review Board prior to administration.
Overall, 168 respondents chose to receive a gift card and 151 respondents chose to donate to one of the following charities: the American Red Cross, Samaritan’s Purse, St. Jude Children’s Hospital, or the Humane Society. Because the gift card/donation decision was collected in a separate survey to preserve the respondents’ anonymity, we cannot use these decisions as an alternative measure of ethical behavior in our hypothesis testing.
In total, the study link was clicked 534 times. Of these 534 responses, 118 responses were omitted for being incomplete and 38 responses were omitted because the respondents indicated they did not work in any of the accounting environments being investigated. We use 7,729 as the denominator for computing the response rate as 271 of the 8,000 requests sent were not received (e.g., emails were bounced back by recipients’ email servers). Because some responses were likely blocked by spam filters, we consider the 4.9% response rate to be a lower bound of the actual response rate. This response rate is similar to the previous studies using email recruitment (e.g., Dichev et al. (2013) had a response rate of 5.4%). We also tested for non-response bias using the Armstrong and Overton (1977) method in which early (first 25% of respondents) and late (last 25% of respondents) responses are compared. A comparison of the two groups using either t-tests for ordinal variables or chi-square tests for non-ordinal variables indicates no pervasive pattern of differences between early and late responses.
See Appendix 1, Panel C for a description of ETHJUDGE and Panel D for the additional variables.
The two scenarios were designed to accomplish several objectives. First, we use multiple scenarios to avoid potentially idiosyncratic results from using a single scenario. Second, to permit comparison of the ethical judgments of respondents from both public accounting organizations and OOTs, it was necessary for respondents from both organization types to respond to the same scenarios. That is, if respondents from OOTs received an OOT-specific ethical scenario, we would not have been able to compare their ethical judgments to those of respondents from public accounting organizations. Because all of the respondents in our sample are CPAs and most CPAs have at least some public accounting experience or training, but may not have non-public accounting experience, we decided to have all respondents receive one of two public accounting scenarios in order to ensure that all respondents would receive a scenario they could somewhat relate to.
EI_EFFECTIVE is used to measure ethical infrastructure development for hypothesis testing purposes because the diverse indicia of a developed ethical infrastructure make creating one scale to represent all questions related to the five components prohibitively difficult. Further, the mere presence of an ethical infrastructure component will not influence ethical behavior if it is not perceived to be effective. It is also possible that different organizations may have slightly different ethical infrastructure components, so measuring the perceived effectiveness of each component does not penalize unique organizations for having unique ethical infrastructure components if these components are perceived to be effective. Last, this measure should theoretically mirror actual ethical infrastructure development because a more developed ethical infrastructure should, ceteris paribus, be viewed as more effective.
While neither of the items specifically include the word “professional,” the instructions provided in the applicable section of the instrument specify that “this final section pertains to perceptions of your profession.” The decision to rely on instructions rather than including “professional” in the professional autonomy items was made in an effort to simplify the items’ language.
All tests related to the research question are untabulated due to the inherent difficulty of identifying all of the different sub-groups being compared in a table. Moreover, where appropriate, we repeat our tests after accounting for the effects of multiple comparisons using the Tukey adjustment and note any changes in inferences. Finally, tests for whether respondents agree (disagree) with a statement, unless otherwise noted, are a test of whether the mean responses are statistically different and directionally greater (less) than the scale midpoint (i.e., “neither agree nor disagree”).
There is a significant positive correlation between reported organization size and perceived ethical infrastructure effectiveness (r = 0.477, p < 0.001). However, smaller organizations may still need developed ethical infrastructures. For example, smaller organizations may have weaker internal control systems in general and more opportunity for fraud, so a developed ethical infrastructure in these organizations could actually be more important than it would be in larger organizations.
As CPAs, respondents are subject to state and national professional codes of conduct in addition to organizational ethics codes. However, we focus on organizational ethics codes in this study because all respondents are CPAs licensed in Florida and are likely subject to the same or similar professional codes of conduct.
As a reminder, all respondents are CPAs licensed in Florida and, thus, are required to complete Florida’s specific four-hour ethics course every two years. Notably, the Florida ethics course content focuses primarily on Florida laws and administrative code (i.e., administrative regulations) related to the practice of public accounting rather than focusing on ethical situations that CPAs may face. To the extent other states require ethics courses with similar content, the opinions of our respondents are likely representative of how CPAs in those states view the state sponsored ethics courses. However, some states may require ethics courses with broader coverage.
Respondents within each accounting organization type both with and without ethics-based incentives and punishments perceived incentives to encourage ethical behavior as significantly less effective than punishments to discourage unethical behavior (all p < 0.041) except for CPAs at non-profit organizations, both with (t = 1.34, p = 0.213) and without ( t= 1.59, p = 0.139) ethics-based punishments and rewards.
While we did not collect information on specific ethics-based incentives beyond what is reported here, we did provide respondents with the opportunity to comment on the organizations’ ethics-based punishments and rewards. However, most of these comments focused primarily on organizations’ ethics-based punishments and several implied that incentives were not appropriate because ethical behavior is a baseline expectation. Appendix 2 reports on the respondents’ comments in more detail.
Further analysis indicates respondents at large CPA firms and industry OOTs, respectively, more strongly believe reports of ethical concerns will be kept anonymous than respondents at small CPA firms (t = 2.50, p = 0.013) and government/non-profit OOTs (t= 2.01, p = 0.045).
Respondents at small CPA firms indicate significantly higher agreement with the effectiveness of ombudsmen at discouraging unethical behavior (t = 2.37, p= 0.020) and lower agreement with the effectiveness of ombudsmen at encouraging ethical behavior (t= 1.96, p = 0.053). Respondents at small CPA firms exhibit marginally higher agreement that their ombudsman has power (t = 1.85, p = 0.067) compared to respondents at larger firms.
The fact that the formal and informal systems in an organization positively influence respondents’ perceptions of the ethical culture is somewhat reassuring. Ultimately, as one of the respondents commented (see Appendix 2): “Definitely no amount of ethics training [or other ethical infrastructure features] is going to keep [an associate] from following the [unethical] example set by the partner.” We interpret the significant relationship between the ethical infrastructure and culture as suggesting the organizations represented in our study are perceived as “walking the talk.” We appreciate an anonymous reviewer for illuminating this point.
As noted previously, to speak to more accounting settings, we randomly assigned respondents to either an audit (Sam) or a tax (Sharon) scenario. Conducting the hypothesis testing separately for the Sam and Sharon scenarios yields inferentially similar results with some qualifications. Specifically, for the Sharon scenario, there are only direct effects of AUTONOMY (t = 3.21, p = 0.001, one-tailed) and EI_EFFECTIVE (t = 2.62, p = 0.005, one-tailed) on ETHJUDGE and there is no evidence of CULTURE is a mediator of this relationship. In addition, for the Sam scenario, there is no direct effect of EI_EFFECTIVE on ETHJUDGE when CULTURE is not in the model; however, the indirect effect through CULTURE is still significant. Thus, in both scenarios EI_EFFECTIVE and AUTONOMY are related to ETHJUDGE either directly or indirectly.
We also note that, while Wilensky (1964) finds that bureaucracy is not a threat to professionalism, we find a significant negative correlation between organization size and reported professional autonomy (r = -0.241, p < 0.001). This suggests that larger organizations, which likely are more bureaucratic in nature, may restrict professional autonomy for accounting professionals. However, we do not find differences in perceived professional autonomy between public accounting firms and OOTs (t = 0.85, p = 0.396).
We also included additional items to measure professionalism that are based on theory but have not been previously validated. The additional items for professionalism are the following four items: (1) you perform non-traditional accounting work (R) and (2) you feel pressured by your superiors or firm/organization to complete your work in a way you disagree with (R), (3) your firm segments work into small portions (R), (4) your firm provides non-traditional accounting services (R), and (5) your firm employs non-CPA professionals as managers (R). These items are excluded due to poor reliability (Cronbach’s α = 0.470).
References
Akaah, I. P. (1992). Social inclusion as a marketing ethics correlate. Journal of Business Ethics, 11(8), 599–608.
Akaah, I. P., & Riordan, E. A. (1989). Judgments of marketing professionals about ethical issues in marketing research: A replication and extension. Journal of Marketing Research, 26(1), 112–120.
American Institute of Certified Public Accountants (AICPA). (2016). Code of professional conduct. American Institute of Certified Public Accountants, sections 1.000.010.21 and 1.000.010.23.
Andiola, L. M., Downey, D. H., & Westermann, K. D. (2020). Examining climate and culture in audit firms: Insights, practice implications, and future research directions. Auditing: A Journal of Practice & Theory, 39(4), 1–29.
Armstrong, J. S., & Overton, T. S. (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Research, 14(3), 396–402.
Association of Certified Fraud Examiners (ACFE). (2016). 2016 Report to the nations on occupational fraud & abuse. Association of Certified Fraud Examiners.
Baumhart, R. C. (1961). How ethical are businessmen? Harvard Business Review, 39(4), 6–19.
Bazerman, M. H., Loewenstein, G., & Moore, D. A. (2002). Why good accountants do bad audits. Harvard Business Review, 80(11), 96–103.
BBC News. (2013). Deloitte fined £14m over MG Rover advice. BBC News. Retrieved August 23, 2020, from https://www.bbc.com/news/business-24016262
Bobek, D. D., Dalton, D. W., Daugherty, B. E., Hageman, A. M., & Radtke, R. R. (2017). An investigation of ethical environments of CPAs: Public accounting versus industry. Behavioral Research in Accounting, 29(1), 43–56.
Bobek, D. D., Hageman, A., & Radtke, R. R. (2010). The ethical environment of tax professionals: Partner and non-partner perceptions and experiences. Journal of Business Ethics, 92(4), 637–654.
Bobek, D. D., & Radtke, R. R. (2007). An experiential investigation of tax professionals’ ethical environments. Journal of the American Taxation Association, 29(2), 63–84.
Booth, P., & Schulz, A. K. (2004). The impact of an ethical environment on managers’ project evaluation judgments under agency problem conditions. Accounting, Organizations and Society, 29(5/6), 473–488.
Brown, K., & I. J. Dugan. (2002). Arthur Andersen’s fall from grace is a sad tale of greed and miscues. The Wall Street Journal. Retrieved August 23, 2020, from https://www.wsj.com/articles/SB1023409436545200
Chonko, L. B., & Hunt, S. D. (1985). Ethics and marketing management: An empirical examination. Journal of Business Research, 13(4), 339–359.
Dalton, D., & Radtke, R. (2013). The joint effects of Machiavellianism and ethical environment on whistle-blowing. Journal of Business Ethics, 117(1), 153–172.
Delaney, J. T., & Sockell, D. (1992). Do company ethics training programs make a difference? An empirical analysis. Journal of Business Ethics, 11(9), 719–727.
Dichev, I. D., Graham, J. R., Harvey, C. R., & Rajgopal, S. (2013). Earnings quality: Evidence from the field. Journal of Accounting and Economics, 56, 1–33.
Egan, M. (2016). I called the Wells Fargo ethics line and was fired. CNN Money. Retrieved August 20, 2020, from https://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-fake-accounts/index.html
Eynon, G., Hill, N. T., & Stevens, K. T. (1997). Factors that influence the moral reasoning abilities of accountants: Implications for universities and the profession. Journal of Business Ethics, 16(12/13), 1297–1309.
Ferrell, O., & Skinner, S. J. (1988). Ethical behavior and bureaucratic structure in marketing research organizations. Journal of Marketing Research, 25(1), 103–109.
Fiolleau, K., & Kaplan, S. (2017). Recognizing ethical issues: An examination of practicing industry accountants and accounting students. Journal of Business Ethics, 142(2), 259–276.
Gendron, Y. (2002). On the role of the organization in auditors’ client-acceptance decisions. Accounting, Organizations and Society, 27, 659–684.
Gendron, Y., & Spira, L. (2009). What went wrong? The downfall of Arthur Andersen and the construction of controllability boundaries surrounding financial auditing. Contemporary Accounting Research, 26(4), 987–1027.
Gendron, Y., & Spira, L. F. (2010). Identity narratives under threat: A study of former members of Arthur Andersen. Accounting, Organizations and Society, 35, 275–300.
Gerstein, M. (2014). Determining whether an accounting firm is ethical. CPA Journal, 84(6), 68–71.
Goetz, J. F., Jr., Morrow, P. C., & McElroy, J. C. (1991). The effect of accounting firm size and member rank on professionalism. Accounting, Organizations and Society, 16(2), 159–165.
Hegarty, W. H., & Sims, H. P., Jr. (1979). Organizational philosophy, policies, and objectives related to unethical decision behavior: A laboratory experiment. Journal of Applied Psychology, 64(3), 331–338.
Hunt, S. D., Chonko, L. B., & Wilcox, J. B. (1984). Ethical problems of marketing researchers. Journal of Marketing Research, 21(3), 309–324.
Jones, G. R. (1983). Transaction costs, property rights, and organizational culture: An exchange perspective. Administrative Science Quarterly, 28(3), 454–467.
Jones, H. (2012). Update 1: PwC hit with record fine for UK audit failures. Reuters. Retrieved August 22, 2020, from https://www.reuters.com/article/accounting-pwc-fine/update-1-pwc-hit-with-record-fine-for-uk-audit-failures-idUSL6E8C60NV20120106
Kaptein, M., & Schwartz, M. (2008). The effectiveness of business codes: A critical examination of existing studies and the development of an integrated research model. Journal of Business Ethics, 77(2), 111–127.
Lail, B., MacGregor, J., Marcum, J., & Stuebs, M. (2017). Virtuous professionalism in accountants to avoid fraud and to restore financial reporting. Journal of Business Ethics, 140(4), 687–704.
Lander, M. W., Koene, B. A. S., & Linssen, S. N. (2013). Committed to professionalism: Organizational responses of mid-tier accounting firms to conflicting institutional logics. Accounting, Organizations and Society, 38, 130–148.
Latan, H., Ringle, C. M., & Jabbour, C. J. C. (2018). Whistleblowing intentions among public accountants in Indonesia: Testing for the moderation effects. Journal of Business Ethics, 152(2), 573–588.
McCann, D. (2017). Two CFOs tell a tale of fraud at HealthSouth. CFO Magazine. Retrieved July 17, 2021, from https://www.cfo.com/fraud/2017/03/two-cfos-tell-tale-fraud-healthsouth/
Pavlo, W. (2014). Making people behave more ethically, An MBA's view. Forbes. Retrieved July 26, 2021, from https://www.forbes.com/sites/walterpavlo/2014/01/16/making-people-behave-more-ethically-an-mbas-view/?sh=769739a52100
Preacher, K. J., & Hayes, A. F. (2004). SPSS and SAS procedures for estimating indirect effects in simple mediation models. Behavior Research Methods, Instruments, & Computers, 36(4), 717–731.
Rockness, H., & Rockness, J. (2005). Legislated ethics: From Enron to Sarbanes-Oxley, the impact on corporate America. Journal of Business Ethics, 57(1), 31–54.
Schaefer, T. E. (1984). Professionalism: Foundation for business ethics. Journal of Business Ethics, 3(4), 269–277.
Schwepker, C. H. (1999). Understanding salespeople’s intention to behave unethically: The effects of perceived competitive intensity, cognitive moral development and moral judgment. Journal of Business Ethics, 21(4), 303–316.
Somers, M. J. (2001). Ethical codes of conduct and organizational context: A study of the relationship between codes of conduct, employee behavior and organizational values. Journal of Business Ethics, 30(2), 186–195.
Stikeleather, B. R. (2016). When do employers benefit from offering workers a financial reward for reporting internal misconduct? Accounting, Organizations and Society, 52, 1–14.
Stuebs, M., & Wilkinson, B. (2010). Ethics and the tax profession: Restoring the public interest focus. Accounting and the Public Interest, 10, 13–35.
Suddaby, R., Gendron, Y., & Lam, H. (2009). The organizational context of professionalism in accounting. Accounting, Organizations and Society, 34, 409–427.
Sweeney, B., Arnold, D., & Pierce, B. (2010). The impact of perceived ethical culture of the firm and demographic variables on auditors’ ethical evaluation and intention to act decisions. Journal of Business Ethics, 93, 531–551.
Treviño, L. K. (1990). A cultural perspective on changing and developing organizational ethics. Research in Organizational Change and Development, 4, 195–230.
Valentine, S., & Barnett, T. (2007). Perceived organizational ethics and the ethical decisions of sales and marketing personnel. Journal of Personal Selling & Sales Management, 27(4), 373–388.
Victor, B., & Cullen, J. B. (1988). The organizational bases of ethical work climates. Administrative Science Quarterly, 33(1), 101–125.
Weaver, G. R., Treviño, L. K., & Cochran, P. L. (1999). Integrated and decoupled corporate social performance: Management commitments, external pressures, and corporate ethics practices. Academy of Management Journal, 42(5), 539–552.
Weber, J. (1981). Institutionalizing ethics into the corporation. MSU Business Topics, 29(2), 47–52.
Weber, J. (1993). Institutionalizing ethics into business organizations: A model and research agenda. Business Ethics Quarterly, 3(4), 419–436.
Weber, J. (2015). Investigating and assessing the quality of employee ethics training programs among US-based global organizations. Journal of Business Ethics, 129(1), 27–42.
Weber, J., & Gerde, V. W. (2009a). A model to audit a company’s ethics and compliance program (Part 1). Ethikos, 23(1), 8–11, 16.
Weber, J., & Gerde, V. W. (2009b). A model to audit a company’s ethics and compliance program (Part 2). Ethikos, 23(2), 8–11.
Weber, J., & Wasieleski, D. M. (2013). Corporate ethics and compliance programs: A report, analysis and critique. Journal of Business Ethics, 112(4), 609–626.
Whistleblowing Commission. (2013). Code of practice for whistleblowing. Public Concern at Work.
Wilensky, H. L. (1964). The professionalization of everyone? American Journal of Sociology, 70, 137–158.
Wyatt, A. R. (2004). Accounting professionalism—They just don’t get it! Accounting Horizons, 18, 45–53.
Zeff, S. A. (2003). How the U.S. accounting profession got where it is today: Part II. Accounting Horizons, 17(4), 267–286.
Zey-Ferrell, M., Weaver, K. M., & Ferrell, O. C. (1979). Predicting unethical behavior among marketing practitioners. Human Relations, 32(7), 557–569.
Acknowledgements
We appreciate helpful comments from Deborah Seifert, Bryan Stikeleather, and University of South Carolina Discovery Day participants, as well as the assistance of the Darla Moore School of Business Office of Alumni Relations—particularly Mary Ruffin Childs, Whitney Evans, and the Florida Institute of Certified Public Accountants in recruiting respondents. In addition, this paper is based on Spenser Seifert’s undergraduate honor’s thesis, which was supervised by Donna Bobek Schmitt.
Funding
This study has benefitted from financial assistance provided by the University of South Carolina’s Magellan Scholar and Magellan Mini Grants.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The authors declare that they have no conflict of interest.
Ethical Approval
All procedures performed in the experiments were in accordance with the ethical standards of the University’s Institutional Review Board and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards.
Informed Consent
Participants were provided informed consent prior to completing the study.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Appendices
Appendix 1: Ethical Scenarios and Measured Variables
Panel A: Ethical decision scenario—Sam
Panel B: Ethical decision scenario—Sharon
Panel C: ETHJUDGE variable
ETHJUDGE—Ethical judgment is measured by averaging a total of nine items based on three responses about each of the three possible actions Sharon or Sam could take in their respective scenarios. Specifically, respondents must indicate their level of agreement with three statements with respect to each of the three possible actions. As only one possible action is the most ethical option, responses to the two less ethical options (i.e., possible actions two and three in the scenarios above) are reverse coded such that larger values indicate more ethical judgments.
Panel D: Additional model variables
EI_EFFECTIVE—Effectiveness of the ethical infrastructure is measured by averaging responses to the following ten items (i.e., two items for each of the five components). Respondents with a given ethical infrastructure component indicate on a seven-point scale, anchored by “strongly disagree” and “strongly agree,” how effective the component is at encouraging (discouraging) ethical (unethical) behavior. Respondents who report not having a given component in place at their organization are assigned zeros for the two effectiveness items for that component.
-
1.
My firm/organization’s code is effective at encouraging ethical behavior.
-
2.
My firm/organization’s code is effective at discouraging unethical behavior.
-
3.
Firm/organization required ethics training is effective at encouraging ethical behavior.
-
4.
Firm/organization required ethics training is effective at discouraging unethical behavior.
-
5.
Punishments at my firm/organization are effective at discouraging unethical behavior.
-
6.
Incentives at my firm/organization are effective at encouraging ethical behavior.
-
7.
The ethics reporting system at my firm/organization is effective at encouraging ethical behavior.
-
8.
The ethics reporting system at my firm/organization is effective at discouraging unethical behavior.
-
9.
The ethics review process at my firm/organization is effective at encouraging ethical behavior.
-
10.
The ethics review process at my firm/organization is effective at discouraging unethical behavior.
AUTONOMY—Professional autonomy is measured as the average of the following two statements. Responses are on a six-point scale anchored by “never” and “always.” These items were self-developed based on Wilensky’s (1964) discussion of professional autonomy.Footnote 28
-
1.
You feel ownership of your work.
-
2.
You have the autonomy to complete your work in the way you feel is best.
CULTURE—Perceptions of organizational ethical culture are measured by averaging the responses to two statements regarding the respondents’ firm/organization. The responses are on a seven-point scale anchored by “strongly disagree” and “strongly agree.” The statements are as follows:
-
1.
As a whole, my firm/organization has strong ethical values that reinforce ethical decision-making.
-
2.
My firm/organization is greatly concerned with ethical behavior.
Appendix 2: Detailed Analysis of Study Comments
The instrument utilized in this study contains up to seven opportunities for respondents to provide open-ended comments. Overall, 127 of 378 total respondents provided 217 written comments across the four sections of the questionnaire. The comments range greatly in content and length. One of the authors classified the comments into one of three sections based on where the comments are made in the questionnaire: (1) the ethical scenario, (2) all of the ethical infrastructure comments, and (3) the final study comments. Then, the author further categorized the comments based on the content of each individual comment.
Supplemental Text Analysis of Comments Regarding the Scenarios
To provide additional insight into the ethical reasoning processes utilized in various ethically challenging scenarios, we present a supplemental analysis of the comments provided regarding the ethical scenarios included in the instrument. These comments provide some additional insight into how ethical scenarios are perceived by accountants. Results from this analysis are tabulated in Table 11.
The section containing comments on the Sharon scenario provides insight into the way accountants approach ethical scenarios in which two ethical codes, personal and professional, are competing (see Appendix 1 for the scenario prompts). Although client confidentiality standards may be complicated when criminal behavior is involved, the scenario does not involve criminal behavior and none of the respondents’ comments mentioned issues related to criminal conduct. Many respondents assessed the situation based on the accounting ethics principles they were taught. As Table 11 shows, 23% of commenters note the scenario is likely the result of a conflict of interest that Sharon should have prevented by excusing herself from the engagement. Moreover, 11% suggest confidentiality is essential regardless of negative personal effects; 9% indicate independence is still required in this tax setting; and another 9% indicate disclosing the information about Soda Corp. could be considered insider trading. One interesting example of an insider trading comment is:
I think Martha Stewart going to jail due to insider trading all those years ago reinforces the fact that is telling ANYONE about this so they could [act] on this information would be the wrong [thing] to do as a CPA.
In addition to these accounting principle and regulation-based comments, another group (11%) of commenters simply asserted their own ethical maxims to interpret the situation. An example of this type of comment is:
“The right thing to do” is taught in the Ethics class and we all know that…
We are human however and our flight or fight instinct would lead most of us to protect ourselves and our loved ones.
The last group of respondents sought alternative solutions rather than selecting one the actions presented. Overall, 20% of commenters suggested something similar to or expanded on an ethical option presented to them, such as suggesting that Soda Corp. avoid liquidation if it was in the company’s best interest. However, another group of respondents (14% of commenters) suggested that they would “hint” to their sister that Soda Corp. was in trouble without actually telling her directly:
I would let my sister know in a less direct way. I would drop hints and make suggestions without coming out and directly stating the company was going to liquidate and she would be laid off. I might say things like “the market is a good time now”, try and shift her towards looking at jobs at other companies, etc.
One respondent even indicated that this was the option he/she would pursue because it would be hard to prove:
I would probably advise her to dump her stock and look for another job. However, I’m struggling to reconcile this with rules pertaining to insider trading and client confidentiality. It would be difficult to prove that she heard the “rumor” from me and not a co-worker... who might have heard the “rumor” in passing in the hallway. Additionally, the context provided regarding her life situation makes it clear that human suffering would result from my withholding of the information. With this in mind, I would probably tell her and feel comfortable justifying my decision knowing that a jury would be unlikely to convict on insider trading. Regarding client confidentiality, it’s unlikely that the other individuals privy to this information have been able to maintain the secrecy, and thus, it is likely already defensible as public information.
The category of responses related to the Sam scenario yields interesting results as well. As shown in Table 11, 23% of commenters in this category indicate that they would consult their superiors, 21% suggest engaging a 3rd party, such as a lawyer, to help make the decision, and 7% state that further investigation is needed. In a similar fashion to the Sharon scenario, commenters also suggest alternative actions similar to those presented (9%) and present general ethical principles (21%). However, there is one group that contains particularly interesting comments, the “game theory” group. The “game theory” group contains comments that are reminiscent of economic game theory, in which commenters attempt to think all the way to the end result of each action with regard to Michael’s fraud and select the most favorable option. A good example of this type of comment is:
While I know that most people in public accounting practice would choose the first scenario [i.e., the middle option in which Michael is quietly removed], it is because they would argue that it is the “best scenario” for the general public. But really, you have to consider that by allowing Michael to go untouched, he is going to end up working for another firm, picking up more big tech companies of the world, and allowing them to commit fraud. And at who’s expense? The poor people investing in their stocks and the ethical members of the company that believed in it and reinvested their equity. No matter what, you cannot cover up fraud.
Text Analysis of Respondent Comments Regarding Ethical Infrastructure
Table 12 provides a breakdown of the comments related to ethical infrastructure.
The comments about organizations’ ethical infrastructure provide further insight into the current perceived state of the ethical infrastructure within public accounting firms. For example, 18% of commenters in this section have negative comments about their organizations’ ethical infrastructure and 5% indicate that Florida’s ethics training is ineffective (see footnote 20 in the paper for more on this topic). In contrast, some argue organization culture (12%), tone at the top (9%), termination of unethical employees (9%), and the exclusive use of punishments (9%) are responsible for an organization’s ethics more than a developed ethical infrastructure. An example of such a comment is:
In my experience, the biggest deterrent against unethical behavior is Strong Leadership. If the partners allow something unethical, what is keeping the associate from not doing the same? Definitely no amount of training in ethics will keep them from following the example set by the partner.
Another group that bears special attention is the “ethics is innate” group (14%), which posits specifically that ethics are something that cannot be influenced by ethics programs at all, but rather is something innate that individuals either possess or do not. One such comment is:
One is born ethical or not.
Text Analysis of Comments Regarding Independence
For the final section of comments in the instrument, respondents were prompted to “provide any other comments you have about this study.” However, respondents may have seen this as the opportunity to comment on the independence items they responded to just prior to the comment screen. Table 13 provides a breakdown of these comments.
As Table 13 indicates, these independence-related comments range from those strongly in favor (19%) to those strongly opposed (19%) to more independence regulations, with yet another group satisfied with the current requirements (9%). The pro-independence requirement comments often express disillusionment with the current auditing environment, particularly large accounting firms, for example:
The whole practice of a company hiring its own independent CPA firm to audit it is flawed. Everyone would be better served if CPA firms were assigned audits of public companies by the SEC or other professional organization.
Those opposed to more regulation often indicate that more requirements would be burdensome to firms and clients, especially smaller clients that may not be able to afford the extra expenses associated with compliance. The following comment describes this sentiment well:
It’s important to keep in mind that an increase in independence, as you define it, provides a greater benefit to the investment community but a greater burden to the public accounting profession and the businesses they provide services to, particularly in the case of audit. For example, one threat to independence is the relationship built over time between auditors and their long-standing audit clients. It’s only natural that a certain level of trust be built during the years that could unintentionally affect the auditor’s judgement. However, to prevent this would require mandatory turnover of audit teams which places a huge burden on businesses to re-train auditors on the fundamentals and details, to some degree, of the way they operate, to facilitate an effective audit.
The last theme from these comments suggests that small clients often require a lack of independence from their accountants since they cannot afford to hire different firms for each service they require. These comments specifically mention firms that do not provide attest services, where less independence is required. However, the client-professional attachment that is mentioned applies equally to smaller audit firms.
In small local firms, independence is hard to maintain when you are their source for financial knowledge with bookkeeping and tax services. Many business owners only know “cash in cash out” not GAAP. That’s where we come in to assist.
Rights and permissions
About this article
Cite this article
Seifert, S.G., LaMothe, E.G. & Schmitt, D.B. Perceptions of the Ethical Infrastructure, Professional Autonomy, and Ethical Judgments in Accounting Work Environments. J Bus Ethics 182, 821–850 (2023). https://doi.org/10.1007/s10551-021-05001-0
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-021-05001-0