14^th Annual

Symposium on Ethics Research in Accounting

Sponsored by the American Accounting Association’s

Professionalism and Ethics Committee

and the

Public Interest Section

New York, NY

August 2^nd, 2009

Theme:

Exploring Ethics’ Impact on Accounting Practice and Theory

ABSTRACT PROCEEDINGS

OF THE

14^th Annual

Symposium on Ethics Research in Accounting

EDITED BY

JOHN M. THORNTON

AUGUST 2, 2008

NEW YORK, NEW YORK

Author: C. Richard Baker, Adelphi University

Discussant: Timothy J. Fogarty, Case Western Reserve University

Paper 2: THE PERFORMANCE BASED RESEARCH FUND (PBRF) IN NEW ZEALAND: A MOVE TOWARDS REDUCTIONISM IN SCHOLARSHIP?

Author: Gregory A. Liyanarachchi

Discussant: Steven E. Loeb, University of Maryland

Paper 3: Why business unit controllers bias accounting figures: Involvement in management, social pressure and Machiavellianism

Authors: Victor S. Maas, University of Amsterdam

Frank G.H. Hartmann, Erasmus University Rotterdam

Discussant: Martin T. Stuebs, Jr., Baylor University

Concurrent Session 3B: Whistleblowing

Moderator: Pamela Roush, University of Central Florida

Paper 1: ANATOMY OF AN ENROLLMENT FRAUD

Authors: John M. Thornton, Washington State University

Nancy W. Ashley, Washington State University

Discussant: Deborah Seifert, Illinois State University

Paper 2: THE EFFECTS OF MORAL INTENSITY ON ETHICAL SENSITIVITY AND WHISTLEBLOWING INTENTIONS

Author: Tara Shawver, King's College

Discussant: John Sennetti, Nova Southeastern University

Paper 3: WHISTLEBLOWING IN AUDIT FIRMS:

ORGANIZATIONAL RESPONSE AND POWER DISTANCE

Authors: Eileen Z. Taylor, North Carolina State University

Mary B. Curtis, University of North Texas

Discussant: Michael K. Shaub, Texas A&M University

4:00 PM – 4:30 PM Forum Presentations

Paper 1: The ethics of healthcare rhetoric: Accounting as justification for systemic distortion

Authors: Dena Lyst Davis, Indiana Institute of Technology, and D² Consultants

Stanley Davis, Indiana University-Purdue University Fort Wayne

Paper 2: ACCOUNTING ETHICS IN THE EUROPEAN CONTEXT

Author: Bahram Soltani, University of Paris 1 Sorbonne

Paper 3: IDENTIFYING ETHICAL HYPERNORMS FOR THE INTERNAL AUDITING EDUCATOR

Authors: Philip H. Siegel, Augusta State University

Mohsen Naser-Tavakolian, San Francisco State University

Steven M. Mintz, California State University, San Luis Obispo

John O’Shaughnessy, San Francisco State University

Paper 4: REAL ACTIVITIES MANIPULATION AND STRATEGIC TIMING OF PROFIT WARNINGS

Authors: Mary Lai Ping Chai, University of Macau

Paper 5: PROFESSIONAL REGULATION AND ETHICS

Authors: Sara Reiter, Binghamton University, SUNY

Paul Williams, North Carolina State University

Nan Zhou, Binghamton University, SUNY

Paper 6: Deercreek Country Club: a Case Study in Accounting Ethics

Authors : Jason Lee, University of North Florida

Jeffrey E. Michelman, University of North Florida

Paper 7: CAMBRIDGE INVESTMENT GROUP: AN ETHICS CASE FROM MULTIPLE PERSPECTIVES

Authors: Kevin E. Dow, Kent State University

Vincent J. Shea, Kent State University

Bobby E. Waldrup, University of North Florida

Paper 8: Cheating And Whistle blowing In Academia

Authors: Richard A. Bernardi, Roger Williams University

Caitlin A. Banzhoff, Roger Williams University

Abigail M. Martino, Roger Williams University

Katelyn J. Savasta, Roger Williams University

Paper 9: RUSSIAN AND UNITED STATES GRADUATE BUSINESS STUDENTS DIFFER IN THEIR ETHICAL BELIEFS

Authors: Paul Mihalek, Central Connecticut State University

Anne Rich, Central Connecticut State University

John Speir, The American Institute of Business and Economics

Paper 10: Business ethics and Corporate governance EDUCATION

Authors: Zabihollah Rezaee, University of Memphis

Ran Zhang, Peking University

Shahriar Mohammad Saadullah, University of Memphis

Paper 11: A Case of Academic MISCONDUCT: DOES SELF-INTEREST RULE?

Authors: Joanne Jones, York University

Gary Spraakman, York University

Paper 12: UNINTENTIONAL REPORTING BIAS IN AUDITING: THE ROLE PLAYED BY EXPERTISE

Authors: Andrés Guiral, University of Alcalá

Waymond Rodgers, University of California, Riverside

Emiliano Ruiz, University of Cádiz

José A. Gonzalo, University of Alcalá

Paper 13: CASINO GAMBLING, RELEVANT COSTS AND THE PUBLIC INTEREST – LESSONS LEARNED FROM AMERICA’S LARGEST CASINOS

Author: Patrick Kelley, Providence College

Paper 14: ETHICAL PERCEPTIONS: THE EFFECTS OF LONG-TERM VERSUS SHORT-TERM BENEFITS AND COSTS, UNIVERSAL VALUES, AND CONSIDERATION OF FUTURE CONSEQUENCES

Authors: Siew H. Chan, Washington State University

Jeffrey Joireman, Washington State University

Paper 15: SEXUAL HARASSMENT IN THE ACCOUNTING PROFESSION: HAS THE SITUATION IMPROVED? A SURVEY OF AICPA MEMBERS

Authors: Jane Baldwin, Baylor University

Charles Stanley, Baylor University

Ethical Corporate Citizenship: Does it Pay?

Janell L. Blazovich, University of St. Thomas

L. Murphy Smith, Texas A&M University

Abstract

Ethical corporate citizenship and good corporate governance have received increased attention since the financial scandals prevalent at the beginning of the millennium. This study first explores the relationship of ethical corporate citizenship to financial performance (i.e., greater profitability and efficiency, and lower cost of capital). Second, the study examines whether ethical corporate behavior is associated with a market-value premium. Results of prior studies are mixed. The results of our study contribute directly to the recent accounting literature in which specific aspects of ethical corporate behavior have been explored (Fukami et al. 1997; Ittner and Larker, 1998; Ballou et al., 2003; Clarkson et al., 2004). We match firms listed by Business Ethics magazine as “The 100 Best Corporate Citizens” to a sample of control firms of the same size and industry. The univariate results of our study indicate a significant relationship between ethical corporate behavior and financial performance (i.e., greater profitability and efficiency, and lower cost of capital); however, the results of multivariate tests controlling for prior year market value of equity, yielded results which indicate no direct benefit associated solely with appearing on the Business Ethics list. Nevertheless, given our study’s findings of better financial performance and lower risk, we conclude that ethical corporate citizenship does indeed benefit a firm.

DO INVESTORS VALUE A FIRM’S COMMITMENT TO SOCIAL ACTIVITIES?

THE MODERATING ROLE OF INTANGIBLES AND THE IMPACT OF THE SARBANES-OXLEY ACT

Waymond Rodgers, University of California, Riverside

Helen Choy, University of Drexel

Andrés Guiral, University of Alcalá

Abstract

In recent years, investors, creditors, and financial analysts have started to emphasize the importance of intangible assets on a company’s financial health. However, previous research seems to ignore whether the effects of financial or valuation-based intangible asset measures, such as research and development (R&D) and advertising, differ from those of non-financial measures, such as employee and customer satisfaction. It is important to identify the differential effects, if any, especially when corporate social responsibility (CSR) investments play a critical role in firm’s value.

Previous empirical research has found mixed results of the impact of corporate social responsibility (CSR) investments on financial performance. In this paper we contribute to the literature by exploring the complex relationship between intangibles, CSR, and financial performance. In a two stage investor decision-making model we control for firms’ investing in intangibles in our analysis of the impact of CSR on both accounting and market-based measures of financial performance. In addition, we study how a change in the legal environment, the passage of the Sarbanes-Oxley Act, affects the role of intangibles and its impact on the relation between CSR and firm value. Both Partial Least Squares and traditional OLS regression analyses were carried out to measure the impact of CSR intangibles, and its interaction, for a sample of the top corporate citizens as complied by KLD Research and Analytics. Our findings suggest that (1) a firm’s commitment to social activities (CSR) contributes to its financial performance; (2) intangibles moderate the relation between CSR and firm value; and (3) an increase of the impact of intangibles on firm value in the post-SOX period to the detriment of CSR which is no longer significant.

Voluntary Corporate Social Reporting: Signaling Theory Analysis

Lianna Cecil, Eastern Michigan University

Lois S. Mahoney, Eastern Michigan University

William LaGore, Eastern Michigan University

Linda Thorne, York University

Abstract

In this paper, we examine voluntary Corporate Social Reporting (CSR) and consider whether stand alone voluntary CSR reports are used to signal firms’ pro-social and environmental actions and/or profitability and compare it to a legitimacy explanation that CSR reports are used to manipulate stakeholders’ perceptions of a firm’s actions. We use the KLD index as an independent evaluation of firms’ level of CSR, and find that firms that voluntarily issue stand alone CSR reports have higher levels of CSR and a stronger association between CSR and Net Income. Thus, our findings suggest that, consistent with a signaling theory explanation, voluntary CSR reports may be used to signal pro-social and environmental actions and/or profitability to firms’ stakeholders. Implications for research and practice are discussed.

THE MYTH OF SHAREHOLDER OWNERSHIP AND ITS IMPLICATIONS FOR ACCOUNTING

Todd Sayre, University of San Francisco

Abstract

The accounting equation implies that the Modern Corporation has a legal obligation to shareholders for its residual assets and future profit. This contrasts with the legal reality that shareholders have a right to neither the residual assets nor future profit and arguably less power than others (e.g., labor) to obtain them. Implying that shareholders have stronger claims to corporate resources than they actually do violates accounting’s prime directive to provide “useful” information. A solution would be to replace shareholders’ equity with its components, such that Assets = Liabilities + Capital + Retained Earnings. This would better reflect the legal relationship between corporate assets and constituents.

RETHINKING DECISION USEFULNESS

Sue Ravenscroft, Iowa State University

Paul Williams, North Carolina State University

Abstract

Accounting and financial reporting have profound consequences on society. The FASB's stated purpose is to create financial statements that are decision useful in promoting the efficient allocation of resources. While attempting to be non-normative, the FASB inevitably plays a key economic role in society. Any principles or actions that relate to a shifting of resources are necessarily and by definition ethical in their implications. We believe that in claiming a neutral stance the FASB and prior accounting principles boards have obscured the primary purpose of financial reporting.

“Decision usefulness” has been the organizing criterion for accounting policy and accounting scholarship for over forty years. Its inception, however, was not accomplished through explicit theory development or argumentation, but as Staubus notes was done by "stealth." The lack of an explicit period of argumentation and debate over the meaning of decision usefulness helps to explain the disappointing lack of progress and significance to non-accountants of academic accounting research.

In the role of the central focus serving to define and guide accounting’s functions, decision usefulness has not provided any better understanding of accounting than earlier, allegedly normative theories of accounting did. We argue in this paper that decision usefulness is seriously mis-specified and that it is time to think anew about what a useful concept of “decision usefulness” might be. We review the key documents in recent accounting history that caused and argued for the shift to decision usefulness as the objective of financial reporting. We find that the current concept of decision usefulness fails to provide guidance for at least three inter-related reasons. The first conceptual weakness in the concept of decision usefulness relates to its implicitly normative focus, which addresses a particular type of utility for a certain group of users while ignoring the equally legitimate claims of other groups. Decision usefulness rests on a confusion and conflation of individually based ophelimity and socially-defined utility. The next two weaknesses we address are more epistemological. Ambiguity occurs because accounting deals in operational numbers rather than quantities. Finally, we cite evidence regarding the inherent unpredictability of the phenomena accounting data are alleged to be useful for predicting. These conceptual failures were apparent early on in the accounting revolution, and have been amplified in the light of recent research findings.

LINKING VIRTUE TO REPRESENTATIONAL FAITHFULNESS IN MAKING JUDGMENTS IN A PRINCIPLES-BASED ENVIRONMENT

Steven M. Mintz, California Polytechnic State University, San Luis Obispo

Abstract

This paper explores the link between virtue and representational faithfulness in making judgments in a principles-based environment. The motivation for the paper is the impending adoption of International Financial Reporting Standards (IFRS) in the U.S. and its principles-based approach to accounting. A rules-based system emphasizes what to do while a principles-based approach emphasizes how to decide what needs to be to done. Even in a rules-based system there are underlying principles that provide a foundation for making decisions about how to apply standards when the rules are unclear or nonexistent. A conceptual framework is presented in the paper that reflects these judgments informed by virtue considerations, and supported by substance over form evaluations and a true and fair view. Professional Judgment is judgment exercised with due care, objectivity, and integrity within the framework provided by applicable professional standards. Representational faithfulness means that the information incorporated into the financial statements and notes must be verifiable and neutral, reporting economic activity as faithfully as possible. The representational faithfulness of measurement and recognition decisions is enhanced by emphasizing the economic substance of transactions over legal form. As part of the judgment process, choices must be made to determine proper accounting standards, assess uncertainties, decide on proper estimates, and ensure the sufficiency of evidence to support financial statement amounts. The goal is to provide useful information to investors and creditors and others who rely on the accuracy and completeness of financial reports for decision making. Virtue enables the decision maker to make reasoned judgments about representational faithfulness and support the professional judgments needed to ensure reliable information. Other than a code of professional conduct, the professional standards do not directly include an ethics component. Indeed, ethical behavior can (should) not be regulated. Instead, it is through the exercise of virtue that an accountant or auditor can make reasoned judgments in applying the rules and support the integrity needed to withstand pressures imposed by top management to go along with improper accounting. Implications for accounting education are discussed including the readiness of faculty to incorporate IFRS into the curriculum and methods of doing so.

PREPARING ACCOUNTING STUDENTS TO IDENTIFY ETHICAL DILEMMAS:

THE IMPACT OF USING CUED EDUCATIONAL INTERVENTIONS

Mary Jo Billiot, New Mexico State University

David Daniel, New Mexico State University

Sid Glandon, University of Texas at El Paso

Terry Glandon, University of Texas at El Paso

Abstract

Rest’s Model of Ethical Action (1979, 1994) suggests that identifying an ethical dilemma is the initial step in deciding whether an (un)ethical situation exists. In academic settings, ethics cases included in educational materials are cued – prominently displaying “ethics case” in the title or introduction. The cued process encourages students to focus on the ethical aspect of scenarios; cued training is expected to translate into skills to be applied in subsequent, more ambiguous, professional settings. Research indicates that practical experience affects the ability to identify an ethical dilemma. The current project tests whether practice in solving cued ethics cases replicates the effect of practical experience. Results indicate that cued subjects had a greater capacity to identify an ethical dilemma in an ambiguous setting, and they “reasoned” at a higher level of moral development.

Intent Influences Senior Undergraduate Accounting Students Perceptions of the Ethical Acceptability of Earnings Management

Maureen Gowing, University of Windsor

Talal Al-Hayale, University of Windsor

George Lan, University of Windsor

Abstract

The purpose of this study was to investigate if intent (primarily for selfish or unselfish benefit), affected the evaluation of the level of ethical acceptability of earnings management (EM) behaviours as reported by Canadian senior undergraduate accounting (SUA) students. The link between intent and behavioural action made explicit in this research, addresses a question unaddressed in the initial work undertaken by Merchant and Rockness (1994) and Bruns and Merchant (1990). In their EM questionnaire, either primarily good or primarily bad intent was one of six attributes of EM behaviour. In our research we attempted to isolate the perceived ethical acceptability of the managerial judgment to engage in EM from the ethical acceptability of the managerial intent. To focus on any perceived difference in the ethical acceptability of EM behaviours we changed the instructions provided to two sets of senior Canadian undergraduate accounting students. Students were told in the instructions what the manager’s intent was for all EM behaviours, either primarily to benefit self or to benefit others. Our results indicate that there were statistically significant differences in the assessments of ethical acceptability of the same EM behaviours attributable to intent. There were also significant differences attributable to gender. Our theoretical perspective, study design, and results differ from those conducted in the U.S., which have used the same measurement instrument.

ETHICS EDUCATION IN ACCOUNTING: EXPLORING THE INFLUENCE OF CULTURE, GENDER AND EXPERIENCE

Maria Cadiz Dyball, Macquarie University

Renee Radich, Macquarie University

Sue Wright, Macquarie University

Philippa Byers, Macquarie University

Catriona MacKenzie, Macquarie University

Abstract

This paper presents the views of accounting undergraduate students at an Australian university on the sources of their ethical views and values. First, we present a critical evaluation of the approach to ethics education implicit in International Education Standard 4 issued by the International Federation of Accountants (IFAC) in 2006 and 2007. Based on this evaluation, we have developed a unique survey instrument that is designed to be as free as possible from the cultural, gender and political biases that the literature has identified in other ethical tests. We then report the results of administering this survey to 1503 undergraduate accounting students at an Australian university. The instrument seeks the students’ views on ethics and ethics education, as well as demographic and cultural information and career intentions. The students have studied ethics as part of their accounting studies, with their exposure to ethical material varying according to their progress through their studies. The demographic information confirms our perceptions of the diversity of the student population at the university. We present an analysis of their responses, which indicate that the strongest sources of all students’ ethical views are family, culture and religion. They have a variety of understandings and views on ethics, as a result of their diversity and their various stages of education. Whilst not the most important source of students’ ideas about ethics, university study is still influential, and its relative influence increases as students progress through their programs. Based on our analysis of their responses, we suggest approaches to the introduction of ethics education in the accounting curriculum that comply with IES 4 and also are culturally sensitized, recognizing the diversity of the students’ backgrounds and needs. Specifically, at the introductory level, we recommend teaching ethical theories, reflecting the diversity of world views inherent in both Western and Eastern cultures, in which students are encouraged to reflect on how their own views relate to the different world views that are presented to them. Second, we recommend the integration of ethics material into existing intermediate subjects, to allow students to engage with ethical ideas, challenges and even dilemmas while acknowledging their differences in values and prior understanding. Third, in the later accounting subjects, ethical-awareness-raising case studies are recommended, using student experiences in the workplace as a source of material. Students will learn to articulate their views, and to provide support for them, while continuing to appreciate the varying ethical perspectives of others.

Practicing Accountants’ Views

of the Content of Accounting Ethics Courses

Mohammad Abdolmohammadi, Bentley University

Alan Reinstein, Wayne State University

Abstract

The National Association of State Boards of Accountancy’s most recent proposal (NASBA 2007) requires all students sitting for the Uniform CPA examination to have completed a curriculum that includes a three-semester-hour (SCH) ethics course or one that integrates the study of ethics into all accounting courses at the equivalent of the three SCH minimum. If passed, the implied curriculum modification suggests that accounting instructors can benefit from guidance on ethics content to include in their courses. Because much of the debate of how to cover ethics in the curriculum focuses on the requirements to become a CPA, experienced practicing accountants’ views can be helpful in determining the content of ethics courses in accounting. We compare our results with Hurtt &Thomas (2008) who asked academicians similar questions. Specifically, we surveyed 215 highly experienced practicing accountants (the vast majority of whom were CPAs). Among the top choices of content are current ethical issues, professional codes of conduct, ethical judgment and decision making process/models, corporate codes of ethics, whistleblower protection, record retention, philosophical theories of ethics and theories of ethics. The subjects agreed—moderately-- that ethics courses can influence attitudes and behavior, but they were neutral on whether ethics courses can reduce instances of Enron-like fraud. We also discuss some implications for the future of accounting education.

TAX COMPLIANCE:

THE INTRIGUING EFFECTS OF INDIVIDUAL DIFFERENCE FACTORS

Siew H. Chan, Washington State University

Qian Song, Washington State University

Abstract

Previous research reveals inconsistent findings on the effects of decision outcome framing and perceived likelihood of being audited on tax compliance. Specifically, individuals are not always susceptible to these effects. Indeed, tax compliance is a complex behavior which varies among individuals. This study identifies three individual difference factors (i.e., consideration of future consequences, risk attitude, and perceived role of ethics and social responsibility) to facilitate understanding of tax compliance. The significant three-way interaction results provide support for the hypothesized moderating effects of the individual difference factors on the relationship between decision outcome framing and perceived likelihood of being audited on tax compliance.

A PROFESSION UNDER REVIEW: AN EXAMINATION OF ETHICAL INTENTION

Marilyn Waldron, University of South Australia

Abstract

Business history abounds in high profile cases of questionable ethical behavior exhibited by business executives such as that of Enron, WorldCom, Tyco, Waste Management, Sunbeam and Global Crossing. Litigation accompanying these cases throws into disrepute the ethical profile of the accounting profession. Levels of trust in the accounting profession plunged further with thoughts that these cases may be the ‘tip of the iceberg’. Investigations of historical evidence in accounting practice provide an opportunity to understand the factors explaining ethical decision making by accountants. The purpose of the present research is to investigate the ethical decision making of accountants with a view to understanding the factors underlying ethical decision making in a way that leads to improved ethical practice within the profession.

Prior investigations of ethical behavior in business explore the nature of moral development and moral reasoning, individual factors influencing ethical attitudes and the practicability of teaching ethics. Previously, research has tended to tackle these factors in isolation. The present paper attempts to provide an integrative approach to accounting ethics with a view to uncovering the complexities of ethical decision making, where the foundational relationship exists between values and ethical intention. Complementing this relationship and also in contrast to prior research, the maturation process acts as an antecedent.

The conceptual model was explored using data collected from a mailing to a random sample of certified public accountants listed with the American Institute of Certified Public Accountants. Research results include these four key findings. First, is the ability of an integrated conceptual framework to explain the ethical intention of accountants with values as a foundational component. Second, is the role of the maturational process as an antecedent in explaining ethical decision making. Third, is the function of organization characteristics, such as size, in explaining ethical intention. Fourth, in contrast to prior research results, ethics training exhibits a relationship with ethical decision making. Overall, the research provides critical evidence to explain conflicting results of prior research.

Important implications arise from the present research results. Awareness of the critical nature of values informs decision making in practice and guides future research to enhance an understanding of ethical decision making. In practice, accounting organizations may consider implementation of an evaluation process to assess value levels. As a result of the increased understanding of ethics, an organization could allocate appropriate mentors and review the effectiveness of continuing education.

CODIFIED DISCOURSE IN THE PUBLIC ACCOUNTING PROFESSION

C. Richard Baker, Adelphi University

Abstract

This purpose of this paper is to examine the evolution of the code of ethics of the American public accounting profession as a form of ‘codified discourse’. Using Foucault’s concept of codified discourse, the paper examines the modifications to the code of ethics of through time. The code of ethics has been one of the primary means by which the discourse of the profession has been communicated to its members. A primary question is whether the code has been primarily directed towards the public interest or the private interests of the profession. Extending Preston, et al. (1995) and Beets (1999), it is argued that the changes to the code have been prompted primarily by market forces and the accounting profession’s desire to expand its scope of its services, thus protecting its private economic interests. The paper demonstrates that the codified discourse of the profession can be found more in the self-forming practices of the profession than in its code of ethics. These self-forming practices commence early in the career of a prospective accountant and they shape the accountant into an idealized ethical being; not an ethical being who complies with a code of ethics, but rather an ethical being who is self-regulated and self-formed into an ideal member of the profession. The study is archival, and thus it possesses both the strengths and weaknesses of archival research.

THE PERFORMANCE BASED RESEARCH FUND (PBRF) IN NEW ZEALAND: A MOVE TOWARDS REDUCTIONISM IN SCHOLARSHIP?

Gregory A. Liyanarachchi

Abstract

This essay critically looks at the explicit and implicit claims that have motivated the selection of peer-reviewed publications as the most important indicator of research performance in government initiated research assessment exercises such as the Performance-Based Research Fund (PBRF) in New Zealand. It is argued that the government initiated research assessment exercises such as the PBRF have the potential to inflict a serious damage to the creation and dissemination of knowledge, the most valued academic activities. These have gained the status of the valued activities due to an underlying assumption concerning their motives - that is, academics engage in such activities on the basis of broadly construed intellectual and social merits of such activities and not on the basis of narrowly selected criteria to gain short-term benefits to themselves and their institutions. Specifically, research assessment exercises that are linked to public funding of universities can interfere with maintaining the authenticity of truth claims in accounting and management in two ways. Firstly, the narrowing of the scope of knowledge creation exercise by luring academics to focus on what gets published, and secondly, the insulation of emerging truth claims from wider scrutiny by discouraging critical work because they are not favourably received by the reputed academic journals. As a consequence, instead of promoting academic freedom and subjecting knowledge claims to wider scrutiny, the PBRF encourages academics and their institutions to do the converse – to pursue research agendas set by the editors of a handful of reputed journals. In addition, there is a major concern for small countries as domestic issues may not receive adequate research attention for they are of little interest to international audiences. The essay also develops arguments in favour of a more meaningful indicator of academic performance, which can facilitate an intelligent understanding of accountability in the academy without interfering with the knowledge creation process.

Why business unit controllers bias accounting figures: Involvement in management, social pressure and Machiavellianism

Victor S. Maas, University of Amsterdam

Frank G.H. Hartmann, Erasmus University Rotterdam

Abstract

This paper investigates why some business unit controllers are more likely to deliberately bias accounting data than others. Different from the existing literature, we argue that involvement in management and social pressure are neither necessary, nor sufficient conditions for biasing behavior. Instead, our analysis shows the importance of personality differences. We present the results from an experiment among 136 management accountants, who assumed the role of business unit controller. The results suggest that the personality construct Machiavellianism interacts with involvement to explain controllers’ responses to social pressure to bias accounting data. Controllers scoring high on Machiavellianism were more likely to give in to pressure by business unit management to slack budgetary targets when they had been involved in strategic and operational decision making. Controllers scoring low on Machiavellianism instead became less susceptible to pressure when they had been actively involved in management.

ANATOMY OF AN ENROLLMENT FRAUD

John M. Thornton, Washington State University

Nancy W. Ashley, Washington State University

Abstract

We use a case study methodology to analyze a State Auditor’s Office investigation of an anonymous whistle-blower’s claim that one or more employees at a large university were inflating student enrollments resulting in a “gross waste of public funds.” The audit found that a university employee had wrongfully inflated the university’s student count by adding credits to full-time undergraduate students’ accounts just before the official count was made, then disenrolling them the following morning, all without students’ knowledge or consent. The present paper uses a fraud triangle lens to organize testimonies and evidence given during the audit, and considers claims by employees and administrators that they had done nothing wrong, that they followed practices long established at the current university, and that their policies for recording student enrollments were consistent with practices across the nation.

We find the university had indeed overstated undergraduate student enrollments, and that the practice and methods were unique to the campus under investigation. Much more importantly, we find that the practice of using graduate student “variable credits” to inflate enrollment is wide-spread throughout the university, and has a much greater potential to overstate university enrollments and related state funding. This practice, accepted by the auditor because “everybody is doing it,” has serious implications for the fair allocation of state funds between competing institutions, and opens up several important research questions for the ethical financial reporting for state higher education institutions. Inflating enrollment appears to have a long history within this university, but whether or not this is a “national policy” is an empirical question deserving of future research. Preliminary results based on an ad hoc sample of 10 faculty resumes indicate that this may not be a common practice.

THE EFFECTS OF MORAL INTENSITY ON ETHICAL SENSITIVITY AND WHISTLEBLOWING INTENTIONS

Tara Shawver, King's College

Abstract

Ethical sensitivity and the ability to make sound ethical judgments are important issues facing accounting professionals and academics today. After many large accounting scandals many question why accountants have failed to make ethical decisions. Further some suggest that academics should increase exposure to ethics and professional responsibility in our classrooms. Although accountants are facing more and more ethical dilemmas, there is little research that explores the ethical judgments of accounting students using Jones’s (1991) model of moral intensity. This study explores several business situations to explore the effects of moral intensity to determine which factors may contribute to the identification of an ethical problem, reasons for making a moral judgment, and reasons for blowing the whistle when someone is aware of a questionable ethical dilemma.

WHISTLEBLOWING IN AUDIT FIRMS:

ORGANIZATIONAL RESPONSE AND POWER DISTANCE

Eileen Z. Taylor, North Carolina State University

Mary B. Curtis, University of North Texas

Abstract

While much research regarding whistleblowing focuses on the individual observer of unethical behavior, some suggest that the organization in which these activities occur has an important influence on the observer's willingness to report. We vary the prior behavior of the organization toward whistleblowing, as well as the power distance of the individual committing the unethical action, to explore these organizational influences on willingness to report.

We find that power distance significantly influences whistleblower behavior. Specifically, as power distance increases, individuals are less willing to report observed unethical behavior. While prior response of the organization was not significant alone, it did interact with power distance such that individuals were significantly less willing to report superiors when the prior organizational response was weak, but slightly more willing to report peers in this condition. Finally, gender interacted with power distance. Females appear to be relatively insensitive to variations in power distance while males were more willing to report peers and less willing to report superiors than females.

The ethics of healthcare rhetoric: Accounting as justification for systemic distortion

Dena Lyst Davis, Indiana Institute of Technology, and D² Consultants

Stanley Davis, Indiana University-Purdue University Fort Wayne

Abstract

As discussions of health care reform prevail in the United States, the increasingly strategic nature of communication can be observed between the various parties involved in the process. This paper analyzes some of the rhetoric that has evolved in healthcare, particularly in the physician/patient relationship and in managed care, using the norms of communicative understanding developed by Jurgen Habermas; sincerity, truthfulness, legitimacy, and comprehensibility and shows how accounting has been used to justify this rhetoric. The authors are concerned with not only the lessening of quality which is accomplished while physicians are communicating to the patient in a supposedly sincere, truthful and legitimate manner but in the deception found throughout the U.S. healthcare system with process-distorting communication.

This paper develops for health care administrators, physicians, human resources administrators, accountants, patients, and other interested parties, using the Habermasian theory of communicative understanding, an explanation for the potential consequences to patients and caregivers. This paper discusses the consequences involved because of the way we account for health care delivery and how these consequences can be shielded through the distortion of rhetoric justified by accounting.

ACCOUNTING ETHICS IN THE EUROPEAN CONTEXT

Bahram Soltani, University of Paris 1 Sorbonne

Abstract

High profile corporate scandals and accounting irregularities have put ethics at the center of a debate in Europe. These failures have – because of their size, importance and similarity to events in the US- seriously undermined confidence in the markets.

The purpose of this paper is to study ethical issues regarding accounting and auditing from the European perspective. Rather than looking at the problem of accounting ethics solely in the context of corporate management, this study considers that the ethical dilemma in accounting is strongly affected by corporate culture and environmental factors, including political and professional institutions.

This paper has two specific characteristics which substantially differentiate it from previous papers. Firstly, the purpose of this paper is to articulate a broad perspective on the problem of accounting ethics in some recent European corporate failures- Parmalat (Italy), Royal Ahold (the Netherlands), and Vivendi Universal (France)- by locating ethics at the institutional, corporate and management levels. Secondly, to understand the root causes of failures, the paper focuses on the European corporate context which gave rise to the accounting irregularities and inefficient control mechanisms of these corporations.

European accounting and auditing directives do not contain specific and clear cut ethical guidelines. The analysis of these three corporate failures demonstrates the usual ethical dilemmas coupled with ineffective boards, inefficient corporate governance and internal controls, dominant CEOs, greed and a desire for power, and the lack of a sound ‘tone at the top’ policy. Inappropriate use of financial reporting and accounting systems and ineffective internal and external auditors prevented the detection of the factors of fraud risk in time. For this reason, issues of accounting ethics cannot be dissociated from other corporate and environmental factors.

The discussion of Parmalat, Ahold and Vivendi from the viewpoint of fraud triangle shows the similarities in the major causes of failures in these companies. The essential question would be how to integrate ethics in the company’s culture and to implement control mechanisms in such a way that fraudulent behavior in the context of perceived Incentives/Pressures, Perceived Opportunities, and Attitude/Rationalization can be mitigated.

This paper will hopefully not only contribute to the understanding of academics at American universities, but it may have practical implications for US investors and companies interested in continental Europe.

IDENIFYING ETHICAL HYPERNORMS FOR THE

INTERNAL AUDITING EDUCATOR

Philip H. Siegel, Augusta State University

Mohsen Naser-Tavakolian, San Francisco State University

Steven M. Mintz, California State University, San Luis Obispo

John O’Shaughnessy, San Francisco State University

Abstract

In response to public criticisms of corporate misconduct and business schools’ failure to educate ethical leaders, universities and professional associations alike have sought to improve educators’ ethical decision-making and professional behavior. Social contract theory argues that each community has its own ethical norms. A code of ethics for internal auditors and other related professionals should be based on the ethical norms of their own community (i.e., internal auditing educators). That is, the IIA (or any other profession-related association) might desire its code of ethics to reflect educators’ views of what is acceptable or unacceptable faculty behavior. Donaldson and Dunfee (1999) address the concept of ethical norms developed by a local community in terms of what they term “hypernorms.” Hypernorms are ethical norms considered highly legitimate and obligatory. “They are second-order moral concepts because they represent norms sufficiently fundamental to serve as a source of evaluation and criticism of community-generated norms.” For the purpose of our study, we define internal audit educators’ hypernorms as unethical behaviors widely regarded as unacceptable by the vast majority of internal audit educators. To provide guidance to academic institutions and help internal audit educators to model ethical behavior, we conducted a survey of internal auditing educators’ perception of the ethicality of 107 specific behaviors in teaching, research, and their role as administrators. We link unethical behaviors to specific standards in the IIA Code including integrity, objectivity, competence, and confidentiality and analyze how such behavior might violate code provisions and negatively influence the role model obligation of academic accountants. We identify hypernorms from these behaviors that reflect universally unacceptable behaviors by the internal audit educator community at large and we categorize unethical behaviors into each of the four standards of the IIA.

REAL ACTIVITIES MANIPULATION

AND STRATEGIC TIMING OF PROFIT WARNINGS

Mary Lai Ping Chai, University of Macau

Abstract

The paper attempts to investigate empirically whether firms delay profit warnings strategically through R&D investment choices. I argue that profit warning firms engage in real earnings management to mitigate excessive negative market reaction. However, engagement of real earnings management becomes less viable if bad news are ultimately diluted or even buried by some future good news. Using the cumulative distributions of profit warning patterns, I document that strategic timing of profit warnings is effected by varying the levels of R&D expenditures. The results are also consistent with the argument that greater information asymmetry provides opportunities for managers to engage in real earnings management.

PROFESSIONAL REGULATION AND ETHICS

Sara Reiter, Binghamton University, SUNY

Paul Williams, North Carolina State University

Nan Zhou, Binghamton University, SUNY

Abstract

The events surrounding the regulation of the accounting profession in the early 21^st century provide an example of how the regulation of professions is related to professional ethics. In the early part of the decade, the profession was moving toward less emphasis on certified public accountancy and more market regulation. The changes in regulation of accountancy following Enron as codified in the Sarbanes Oxley legislation move the profession from self regulation to an increased amount of government regulation, a trend that is likely to continue in the wake of the near-collapse of the financial markets and revelation of the Madoff scandal. With increased emphasis on the reliance of the financial system on safeguards such as those provided by auditors, the profession will value professional ethics more highly.

In late 2001, the AICPA voted on a new global interdisciplinary credential, identified as “XYZ”, which emphasized expertise in the strategic integration of knowledge from a variety of business disciplines. The XYZ credential would not have been limited to CPAs and was the culmination of a movement away from the core auditing franchise of the profession. This initiative proved quite controversial, with major segments of the accounting profession, both here and abroad, deciding not to get on board. Ultimately, the membership of the AICPA rejected support for moving forward with the XYZ initiative. Some observers viewed the XYZ incident as yet another departure by the accounting profession from maintaining the ideals of the independent auditor – a trend throughout the second half of the 20^th century that ultimately led to major changes in the regulation of the profession through the Sarbanes-Oxley legislation.

In this paper, we analyze the XYZ controversy and the advent of Sarbanes-Oxley from a theoretical standpoint, relying primarily on the sociological theories of Eliot Freidson and Andrew Abbott. Our concerns are whether the XYZ proposal signified the zenith of the profession’s straying away from central goals of the auditing profession in pursuit of profit or whether the proposal can be seen in another light. We also address the question of what effects creation of the XYZ credential would have had on the professional status of accountants and on the ability of the profession to serve the public interest. We also investigate the effects of Sarbanes-Oxley on professional self-regulation and implications for the professional ethics of accountants.

Deercreek Country Club: a Case Study in Accounting Ethics

Jason Lee, University of North Florida

Jeffrey E. Michelman, University of North Florida

Abstract

The case examines the search that a new General Manager, Claudia Martinez, of a country club goes through when she first suspects unethical and then fraudulent activity by the controller, Cole Dunlap, who is also related to an influential family. The general manager has limited knowledge of accounting, yet senses that things are not right when one employee after another questions the behavior of Cole. Claudia works closely with the Chair of the Board of Directors, a forensic accountant and the state attorney to determine the extent of the fraudulent behavior. Through this process Claudia learns a great deal about accounting and internal control as she tries to better understand what would motivate Cole to engage in this behavior. This case is appropriate for all levels of accounting depending upon the professor’s desire to explore particular issues. Principles of accounting students will find the issues to be particularly relevant as they are introduced to the concepts of internal control. Further, the case illustrates why accounting controls are important to help to keep ethical employees ethical.

CAMBRIDGE INVESTMENT GROUP: AN ETHICS CASE FROM MULTIPLE PERSPECTIVES

Kevin E. Dow, Kent State University

Vincent J. Shea, Kent State University

Bobby E. Waldrup, University of North Florida

Abstract

One problem that students often encounter in accounting education is that they often do not understand the complexity of ethical issues in business. The accounting scandals that surfaced in 2001 and 2002 demonstrate the impact that this lack of understanding can have on society. As a direct response to these accounting scandals (ethical lapses by businesses), there has been increased interest in better understanding the role that corporate ethics plays in organizations.

This case is designed to improve each student’s understanding of ethics with the purpose of strengthening ethical decision-making skills and exposing students to an array of related ethical and fraudulent accounting topics. We provide in the case a real world ethical dilemma (in this case, a bank fraud) in a fraudulent situation and address the following questions: (1) Do people deserve a second chance? Under what circumstances? and (2) Does "fixing" your ethical lapse enough to rehabilitate you?

Cheating And Whistle blowing In Academia

Richard A. Bernardi, Roger Williams University

Caitlin A. Banzhoff, Roger Williams University

Abigail M. Martino, Roger Williams University

Katelyn J. Savasta, Roger Williams University

Abstract

This study surveyed 195 business students (74 women and 121 men) on various aspects of honesty in academics. The results of the study evaluate students’ opinions of cheating, and the percentage of students who have or would whistle blow if they observe cheating. The study also examined whether characteristics such as prior cheating behavior, gender, social desirability response bias, the intent to be honest in the future, and the intent to whistle blow will affect a student’s whistle blowing. To analyze this, our survey uses three scenarios to judge a student’s intent to maintain academic honesty. We also use a variety of questions from prior research on cheating. Our data extends prior research on cheating and social desirability response bias. Our research indicates that students who have whistle blown have a higher reported intention to whistle blow and a higher intention to act honestly. Out data indicate that student intentions are important to the researcher as well as the practitioner.

RUSSIAN AND UNITED STATES GRADUATE BUSINESS STUDENTS

DIFFER IN THEIR ETHICAL BELIEFS

Paul Mihalek, Central Connecticut State University

Anne Rich, Central Connecticut State University

John Speir, The American Institute of Business and Economics

Abstract

Russia, once isolated from the Western world, is now encouraging trade and direct investment.. Currently there is substantial interest by foreign investors, including those in the U.S., to invest in Russian enterprises. The increasing globalization of business in general, and specifically with Russia, requires managers to develop better understanding of the cultural background and ethical reasoning of the individuals who are involved in multinational business.

This paper presents the results of a research study comparing Russian graduate business students with U.S. graduate business students. Survey questions were used to obtain responses related to five business activities. The purpose of this study was to identify whether there are differences in the ethical beliefs of graduate business students in the Russia and the United States. Predications of the responses were based on the four cultural dimensions delineated by Hofstede. The questions asked replicated the study conducted by Nyaw and Ng (1994) The statistical analysis includes a discussion on outlier and bracketing effects.

Our study shows differences between Russian and U.S. graduate business students in ethical behavior in the areas of job security, health and safety, tolerance for unethical behavior towards customers and suppliers and towards business rivals. However, the differences are not always predicable based on Hofstede’s theories.

Business ethics and Corporate governance EDUCATION

Zabihollah Rezaee, University of Memphis

Ran Zhang, Peking University

Shahriar Mohammad Saadullah, University of Memphis

Abstract

The demand for and interest in ethics and corporate governance has significantly increased in the post-Sarbanes-Oxley era. Ethics and corporate governance has transformed from a compliance process to a business strategic imperative, yet many have expressed concern over the corporate governance and ethics education and training provided to students. This study examines the extent to which business schools worldwide are integrating business ethics and corporate governance (BE&CG) education into their curricula. An analysis of 90 academic syllabi provides evidence regarding: (1) the scope and nature of BE&CG education; (2) pedagogical approaches to BE&CG; (3) ethics and corporate governance topics that could be taught as part of BE&CG education; and (4) methods of coverage of BE&CG education. This study initiates a general dialogue on the nature, content, objectives, and delivery of BE&CG education. An exploratory review and content analysis of a sample of 90 syllabi, representing different sizes of universities and types of organizations worldwide, reveals that business schools offer BE&CG courses emphasizing a broad range of skills, objectives, perspectives, teaching methods, and cognitive content. However, many common themes, topics, and assignments have emerged.

BE&CG courses have emerged in the same fashion as e-commerce courses in the 1990s, and forensic and fraud courses in the early 2000s, with individual faculty designing courses based on their interests, skills, philosophies, and demands. We recommend that accounting programs assess the structure, content, and delivery of BE&CG education in the context of the results presented in this study, and continue to explore innovative teaching methods and approaches to enhance BE&CG education. We further suggest accounting programs establish a curriculum development committee or a focus group to address issues pertaining to feasibility, delivery, and content of BE&CG education in light of the results presented in this study. Global financial scandals and regulatory responses have underscored the importance of BE&CG practice and education and thus encouraged business schools and accounting programs to address BE&CG education. The BE&CG education issues addressed in this study should help business and law schools prepare students for the challenges awaiting them in the area of emerging global business ethics and corporate governance.

A Case of Academic MISCONDUCT: DOES SELF-INTEREST RULE?

Joanne Jones, York University

Gary Spraakman, York University

Abstract

This paper presents an unusual case of academic misconduct. The case is unusual in that the students did not act on their own; rather the instructor initiated and facilitated the academic dishonesty. As a result of the instructor’s actions, the students in one section of a management accounting course were able to achieve significantly higher grades than their peers enrolled in other sections.

In order to explain and understand the findings we draw upon the behavioral ethics research that is concerned with individual and group behavior that occurs in the context of the larger social environment (i.e., Trevino, 1986; Trevino and Weaver, 2003; Trevino, Weaver, and Reynolds, 2006). While much of this research focuses on individual differences in ethical behavior, our case supports the view that in “strong” situations individual differences do not play a significant role in influencing ethical behavior (Snyder and Ickes, 1985). Rather, it appears that the social environment allows the unethical behavior to become “normalized” and not questioned (Arnand et al., 2004; Ashforth and Arnand, 2003; Vaughn, 1990). This supports the view that social context plays a major role in transforming ethical individuals into corrupt perpetrators (Arnand et al., 2003; Brief et al., 2001; Zyglidopoulos and Fleming, 2008).

In addition to the acceptance of the “corrupt environment”, the case highlights that self-serving biases appear to play a major role in interpreting what is fair and the decision to “blow the whistle.” For instance, despite the manner in which they achieved their grades, a significant portion of the students complained when their grades were reduced (upon discovery of the academic misconduct) on the basis that they had done nothing wrong. Further, only students who were enrolled in other se

ctions reported the instructors’ actions since it was unfair to them.

While the case is about academic misconduct, the case shares similar characteristics with many of the recent high profile accounting manipulations and may help us understand why the people who were aware of the manipulations chose to do nothing. As in the cases of Enron and WorldCom, it appears that a key component to their unethical behavior was the way in which they were able to rationalize their behavior and neutralize their potential guilt or regret (Arnand et al., 2004; Zyglidopoulos and Fleming, 2008; Zyglidopoulos et al., 2009). We argue that given a particular social environment, despite knowing what ethics and the law expects of them, people will act unethically and convince themselves via a rationalization process that their self-serving behavior is permissible. For accounting educators, it raises the fundamental question – “If self-interest rules, how can we ensure future accountants act with integrity and put the public interest first?”

UNINTENTIONAL REPORTING BIAS IN AUDITING:

THE ROLE PLAYED BY EXPERTISE

Andrés Guiral, University of Alcalá

Waymond Rodgers, University of California, Riverside

Emiliano Ruiz, University of Cádiz

José A. Gonzalo, University of Alcalá

Abstract

The efficiency of capital markets and the economic system depends on the trust users have in

this information. However, recent resounding financial scandals (e.g., Enron, WorldCom) and several research studies have shown that the number of going concern audit reports for firms with bad financial health is scarce. Auditors’ professional obligation competes with their self-interest since they are hired and fired by their own clients. In this regard, the “self-fulfilling prophecy effect” is one of the most important conflicts of interests, which may bias auditors’ reporting behavior. This effect is the fear that the issuance of a warning signal may precipitate client’s failure because of its negative impact on current and potential investors, creditors, suppliers, and customers. Thus, the self-fulfilling prophecy effect implies auditors’ self interest

since the fear of being dismissed after the release of that warning signal may be present.

The cause of auditors’ bias differs in agency literature versus behavioral research. Agency theory characterizes auditors’ bias as deliberate, whereas behavioral research suggests that psychological heuristics unconsciously lead auditors to bias judgments. In this paper, we investigate the deliberate vs. unconscious cause of auditors’ bias by developing a cognitive model for decision-making.

Our results illustrate that auditors’ judgments unconsciously may be induced by the self-fulfilling prophecy effect that, in turn, may help explain auditors’ reluctance to issue a going concern opinion. Furthermore, previous research has pointed out that less experienced decision-makers (or novices) tend to examine superficially and not look at long-term implications of a situation. In addition, this paper tests whether expert auditors are more sensitive to the long-term consequences of their opinions. It is advanced that auditors with higher expertise in going concern evaluations, measured by their auditing experience and the frequency with which they audit financially distressed clients, will have a higher tendency to release warning signals in order to maintain their reputation and avoid the costs of financial scandals. This approach demonstrates whether auditors’ expertise is a potential moderator variable, which contributes to mitigate auditors’ unconscious reporting bias.

CASINO GAMBLING, RELEVANT COSTS AND THE PUBLIC INTEREST – LESSONS LEARNED FROM AMERICA’S LARGEST CASINOS

Patrick Kelley, Providence College

Abstract

There has been a significant growth of casino gambling in the United States during the past 20 years, which has resulted in hundreds of thousands of jobs across the country. While proponents of casino gambling tend to focus on the economic benefits of casinos, including employment opportunities and increased tax revenues, relevant costs are frequently not addressed, which can prove detrimental to the public interest. This paper examines the relevant costs associated with the growth of two of America’s largest casinos, which are located eight miles apart in southeastern Connecticut. These costs are broadly categorized as infrastructure/government costs and social costs. The lessons learned from the development of these two Indian casinos can be valuable for public officials and citizens in other areas considering the establishment of casinos. Identifying relevant costs and who will pay for them can help those communities avoid some of the problems experienced in Connecticut.

ETHICAL PERCEPTIONS:

THE EFFECTS OF LONG-TERM VERSUS SHORT-TERM BENEFITS AND COSTS, UNIVERSAL VALUES, AND CONSIDERATION OF FUTURE CONSEQUENCES

Siew H. Chan, Washington State University

Jeffrey Joireman, Washington State University

Abstract

The purpose of this research is to examine individuals’ perceptions of the ethicality of questionable acts. Two studies were conducted to provide insight into this issue. Study 1 assessed individuals’ perceptions of the long-term versus short-term benefits and costs of questionable acts. The results showed that individuals considered unethical actions as more costly to the organization than to the employee and more costly in the long-term than in the short-term. These findings may indicate that individuals who value the well-being of others and those who are more concerned with the future consequences or less concerned with the immediate consequences of their actions were more likely to perceive questionable acts as unethical. Study 2 was conducted to facilitate understanding of these findings. The results indicated that individuals with high-transcendent values (who value the well-being of others) perceived the questionable acts as unethical (for the integrity, respect, and standards scenarios). The findings also showed that those with high conservation values (who value tradition and conformity to norms) perceived the questionable acts as unethical (for the integrity scenarios). However, individuals with high or low self-enhancement values (who value their self-interest above others) were not ethically sensitive to the scenarios. Finally, the results revealed that individuals with high scores on the consideration of future consequences (CFC) Total scale and the CFC-Future subscale were positively correlated while the CFC-Immediate subscale was negatively correlated with individuals’ ethical perceptions (for the respect and standards scenarios).

SEXUAL HARASSMENT IN THE ACCOUNTING PROFESSION: HAS THE SITUATION IMPROVED?

A SURVEY OF AICPA MEMBERS

Jane Baldwin, Baylor University

Charles Stanley, Baylor University

Abstract

Almost 10 years ago, we conducted a study on the perceived existence and impact of sexual harassment in the accounting profession. Responses from that previous study showed that sexual harassment was an area of concern among nearly all of the accountants surveyed. Both men and women in the accounting profession perceived themselves to be victims of sexual harassment. In addition, we found that many firms had not implemented written policies involving sexual harassment and that management response to both internal and client-initiated harassment was seen as inadequate. We suggested that accounting firms needed to consider implementing sexual harassment policies in order to limit their costs of litigation and lost productivity.

In this study, we have updated our earlier finding by conducting another survey about sexual harassment in the accounting profession. The purpose of this updated study was to determine if the situation regarding sexual harassment had improved. Unfortunately, the results indicate that sexual harassment continues to be a problem within the profession. However, in comparing the current results with those results of the previous study, we found several important differences between the current results and those of the previous study. Again, both men and women perceive themselves to be victims of sexual harassment. In the current study, we found that firms had made serious attempts to communicate the policies of the firms regarding sexual harassment and to communicate those policies to their employees. As a result of the increased communication and policies implementation, we found that there were several areas where the occurrences of sexual harassment had decreased substantially. In addition, firm reactions to incidents of harassment appear to have improved as well. While there have been some substantial improvements, these results also suggest that accounting firms need to continue to implement and enforce sexual harassment policies. Again, both men and women perceive themselves to be victims of sexual harassment. Perhaps more disturbing is the fact that firms have continued to do little when clients are guilty of sexual harassment. Still, the results are encouraging in that the profession has made improvements in this area.