Behavioral Research in Accounting
Published annually by the Accounting, Behavior and Organizations Section of the AAA

1996, Volume 8 Supplement

 

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Ethics and Accounting Research: The Issue of Truth

Karen L. Hooks and Joseph J. Schultz, Jr.
Abstract

Many accounting studies use a behavioral paradigm as their underpinning. Clearly, both internal and external validity are necessary to make a behavioral accounting study useful for application. Until recently, there has been little concern in the accounting literature for how deception of research participants affects these two necessary conditions for usefulness (Lord 1992; Dopuch 1992; Gibbins 1992).

This paper explains how we weighed the need for valid results against the ethical dilemma of using deception. In arriving at our decision to use deception, we review considerations about the importance of the research issue and the limited appropriate scientific methods available. We also review social science arguments that have been used to support the application of deceptive methods in other studies. By example, we show that two different scientific approaches resulted in completely different results. Notably, the actual behavior observed in the approach employing deception supported the theoretical hypothesis; the non-deception, opinion-based method did not.

We believe that an understanding of the assessments we mad in designing our study may be helpful to other researchers facing the same types of decisions. In addition, we hope our paper will stimulate discussion on appropriate and ethical procedures for research designs that include deception. 


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An Analysis of Moral and Social Influences on Taxpayer Behavior

Dennis M. Hanno and George R. Violette
Abstract

Developing an integrative model of tax compliance behavior requires the identification of the underlying moral and social influences on taxpayers. In this study, a social psychological model is used to identify the salient beliefs that are related to tax compliance decisions. The model, the theory of reasoned action [Fishbein and Ajzen, 1975; Ajzen and Fishbein, 1980; and Ajzen, 1988], hypothesizes that a behavior can be predicted by the intention to perform the behavior, and that intention is influenced by personal evaluations and social pressures related to performing the behavior. The results indicate that both self-reported and hypothetical compliance behaviors were related to the intention to comply. In addition, compliance intentions were highly associated with beliefs relating to behavioral outcomes and normative perceptions. Specifically, differences in compliance intentions and behavior were traced to differences in beliefs about the importance of fulfilling personal moral and civic obligation.


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Personal and Organizational Culture Effects on Auditor Independence

Carolyn A. Windsor and Neal M. Ashkanasy
Abstract

Research has established that auditorsí moral reasoning development and just world beliefs influence their independence behavior when in conflict with client management. The present study extends these findings by investigating the relationships between organizational culture in Big 6 accounting firms and the two personal constructs identified in earlier work (Windsor and Ashkanasy 1995). Results supported hypotheses that personal constructs are related to organization culture values, although organizational culture dimensions did not separate auditors of differing independence decision-making style. Follow-up interviews with senior audit partners suggest that acculturation processes in accounting organizations result in aggressive and outcome-orientated values, which constrain the association between organizational culture and personal decision-making styles.


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An Evaluation of the Multidimensional Ethics Scale as a Measure of Ethical Sensitivity: Implications for Accounting Ethics Research

Jeffrey R. Cohen, Laurie W. Pant, and David J. Sharp
Abstract

This paper relates the multidimensional ethics scale and factor analysis method of Reidenbach and Robin (1990), Flory et al. (1992) and Cohen et al. (1993) to Restsís (1986) four-component model of ethical decision-making. We believe that the scale items and factor scores measure moral awareness, the first of Restís four components. Using a sample of Canadian auditing professionals, we demonstrate how the regression coefficient of ethical evaluation on these individual factor scores measures respondentsí ethical evaluation of the importance of various criteria, which corresponds to Restís second component (making a moral judgment), and that the importance and awareness measures differ. We believe that this measure of importance is related to moral development, and therefore could be related to the Defining Issues Test, (a commonly used measure of moral development in accounting ethics research). We suggest that these previously independent approaches to measuring individual morality could be integrated.


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Ethics, Experience, and Professional Skepticism: A Situational Analysis

Michael K. Shaub and Janice E. Lawrence
Abstract

A model of auditorsí professional skepticism is developed in this study by adapting Kee and Knoxís [1970] model of trust and suspicion to apply to auditors. This model defines professional skepticism as a function of (1) ethical disposition, (2) experience, and (3) situational factors. Structural equations modeling is used to evaluate the relationship of these factors to professional skepticism. The model is tested using auditors (n=156) from a single Big-6 firm. Each auditorís skepticism is measure and analyzed in nine different high(low)-risk situations. The results indicate auditors endorsing situation ethics are less skeptical and less concerned with professional ethics. CPAs exhibit less skeptical behavior than their uncertified colleagues. Situations increasing skepticism include the existence of (1) a related party transaction, (2) client financial stress, (3) prior client inaccuracies, and (4) poor client-auditor communication. Results also indicate auditorsí skepticism is counteracted when 


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Experimental Evidence on Independence Impairment Conditions: Aggregate and Individual Results

Jeffrey W. Schatzberg, Galen R. Sevcik, and Brian Shapiro
Abstract

Auditor independence and ethical behavior are closely related, and both are influenced by economic incentives. This paper reports some exploratory results from experimental markets that investigate three general economic conditions that have been identified by the theoretical literature as necessary for an impairment of independence. Consistent with predictions, a lower frequency of independence impairment (auditor misreporting) was observed when any of the necessary conditions was absent than when all three conditions were present. However, some subjects maintained their independence even when all three necessary conditions were present, while other exhibited an impairment of independence in the absence of one or two of the three necessary conditions. These results document that the joint existence of all three conditions cannot be interpreted as strictly sufficient for an impairment of independence, and that each condition cannot be interpreted as strictly necessary. One possibility is that the varia


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Ethics and Environmental Auditing: A Comparison of the Levels of Moral Reasoning and Environmental Auditors and Public Accountants

Devaun Kite, Timothy J. Louwers, and Robin R. Radtke
Abstract

This exploratory study examines the differences in moral reasoning levels among environmental auditors, other internal auditors, and public accountants. It is posited that auditors with higher levels of moral reasoning (as measured by Restís (1979) Defining Issues Test) may self-select into environmental auditing assignments. Conversely, auditors with lower levels of moral reasoning may be assigned to environmental audits by the company to protect corporate interests. Fifty-two practicing environmental auditors (as well as 26 internal auditors) participated in the study by completing and returning the experimental survey and the Defining Issues Test (DIT). While results did not support the hypothesis that environmental auditors have higher mean scores on the DIT than other practicing accountants, further analysis revealed that auditors who requested an environmental auditing position had significantly higher DIT scores than those assigned to the position.


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Experimental Investigation of Ethical Standards and Perceived Probability of Audit on Intentional Noncompliance

Dipankar Ghosh and Terry L. Crain
Abstract

The experimental study presented here demonstrates that individual and situation factors are psychologically salient aspects in tax noncompliance. Specifically, a taxpayer who is more ethical or who perceives tax audit probability to be high will have lower intentional noncompliance, and vice-versa. However, these two variables partly moderate each otherís effect, with intentional noncompliance being particularly large when a taxpayer has low ethical standards and has low perceived tax audit probability. The results underline the suggestion of prior research to examine both direct and interaction effects of personality traits, like ethical standards, and environmental variables affecting economic gain from noncompliance, such as perceived probability of tax audit. The participants in this study were undergraduates majoring in business and all had in-class experience in preparing individual tax returns.

The research question and the design of the experiment in this research were very specific in their scope to avoid confounding the results. For example, the impact of other theoretical variables (such as risk preference of taxpayers, tax rates, and penalty rates) that affect compliance decisions was controlled for in the experiment. Ethical standards were measured using the Mach IV instrument. An attempt was made to separate intentional from unintentional noncompliance as they are separate constructs. Finally, audit probabilities were perceived by the taxpayer, in contrast to being objectively manipulated using too high and unrealistic numbers.


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Partner Behavior and Audit Quality Reduction Acts: Vies of Partners and Senior Managers

Joseph V. Carcello, Dana R. Hermanson, and H. Fenwick Huss
Abstract

Prior research on audit quality reduction acts has generally focused on non-managerial personnel in CPA firms. This study gathers perception data on the existence, extent, and possible factors associated with inappropriate partner behavior. A questionnaire addressing these issues was mailed to a national sample of senior managers and partners employed in auditing positions with public accounting firms.

A large majority of the respondents had never observed four of the five inappropriate behaviors examined. However, approximately 25 percent of respondents indicated that they had observed one or more instances of inadequate workpaper review. Two economic factors (large client size and the presence of a fixed-feel audit contract) were most strongly associated with GAAP and GAAS violations. 


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