William Eugene Shafer

Effects of personal values on auditors’ ethical decisions

This study investigates the effects of personal values on auditors’ ethical decision making. Previous accounting research has investigated the value profiles of practicing CPAs and accounting students, and the effects of values on accounting students’ ethical decisions. However, the current study is the first to empirically address the role of values in the ethical decision processes of professional auditors. We surveyed a random sample of AICPA members to assess their value preferences and reactions to an ethical dilemma involving client pressure for aggressive financial reporting. Contrary to our hypothesis, personal value preferences did not influence auditors’ perceptions of the moral intensity of the ethical dilemma. As hypothesized, perceptions of moral intensity influenced both ethical judgments and behavioral intentions.

Professionalism, organizational‐professional conflict and work outcomes: A study of certified management accountants

This study examines the relationships among professionalism, organizational‐ professional conflict and various work outcomes for a sample of Certified Management Accountants. We assessed professionalism using Hall’s Professionalism Scale, and tested the relationships among professionalism, organizational‐professional conflict, organizational commitment, job satisfaction and turnover intentions using a structural equations model. The results indicate that two dimensions of professionalism (dedication to the profession and autonomy demands) were positively associated with perceptions of organizational‐professional conflict. As hypothesized, individuals who perceived higher levels of organizational‐professional conflict were less committed to the organization, had lower levels of job satisfaction and also had higher turnover intentions.

Analysis of a failed jurisdictional claim: The rhetoric and politics surrounding the AICPA global credential project

Purpose – The American Institute of Certified Public Accountants (AICPA) recently proposed a global consulting credential involving a diverse set of professions including accountancy, business law, and information technology. The proposal was widely debated in the professional literature, and was a divisive issue among CPAs. In late 2001, the AICPA membership voted against any further commitment to the credential. The purpose of this paper is to examine the global credential initiative in an effort to understand why professional jurisdictional claims may fail at the theorization stage.Design/methodology/approach – The paper relies primarily on a qualitative review and analysis of archival materials and published articles and commentaries relating to the global credential project.Findings – The analysis indicates that the AICPA failed to establish either the pragmatic or moral legitimacy of the proposed credential in the eyes of the audiences. This failure appears to be attributable to the sociopolitical e...

Effects of a Business Ethics Elective on Hong Kong Undergraduates’ Attitudes Toward Corporate Ethics and Social Responsibility:

This study examines the effect of a business ethics course on undergraduates’ attitudes toward the importance of corporate ethics and social responsibility, as measured by the PRESOR scale. It employs a survey approach, adopting a pretest/posttest methodology in the data collection. A total of 132 undergraduate students were surveyed over a period of four semesters during 2006 and 2007. To test the effects of individual personality characteristics and examine their potential interaction with ethical education, participants’ personal values and degree of Machiavellianism were also assessed. The business ethics course resulted in significantly less support for the traditional “stockholder view” of business, providing backing for the inclusion of a stand-alone business ethics course in the business studies curriculum. In addition, among nonbusiness majors, the course resulted in significantly greater support for the “stakeholder view,” suggesting that it would be especially beneficial to open such a course to nonbusiness students.

Effects of ethical context on conflict and commitment among Chinese accountants

Purpose - The purpose of this paper is to addresses the impact of organizational ethical context (ethical climate and ethical culture) and Machiavellianism on organizational-professional conflict (OPC) and affective organizational commitment (OC) among Chinese accountants. The paper also aims to test for interactive effects of ethical context and Machiavellianism. Design/methodology/approach - The paper is based on a field survey of 89 professional accountants employed by companies operating in Mainland China. Findings - Two aspects of the organizational ethical culture, expectations of obedience to authority and strong ethical norms/incentives, emerged as the dominant influences on both OPC and affective commitment. Strong negative correlations are observed between OPC and OC, and between Machiavellianism and OC. Contrary to expectations, the organizational ethical context had the greatest impact on OC among high Machiavellians. For low Machiavellians, OPC fully mediated the relationship between ethical context and OC, but no such mediation effects are found for high Machiavellians. Originality/value - This is the first study of the relationships among ethical context, OPC and OC among industry accountants in China, and the first study of the effects of Machiavellianism on these relationships. The results generally support our contention that organizational ethical context will be a key determinant of OPC and OC. The fact that weaker ethical cultures were strongly associated with increased conflict and decreased commitment suggests that managers of accounting/auditing departments should take a proactive approach to developing and nurturing positive or supportive cultures. The differences in results for high and low Machiavellians also raise interesting questions that should be addressed in future research.

Auditors' Willingness to Advocate Client-Preferred Accounting Principles

This paper argues that independent auditors have lost sight of their obligation to be truly impartial, and have increasingly adopted an attitude of client advocacy. We argue that auditors have a professional obligation to go beyond merely passing judgment on whether client accounting methods are acceptable under GAAP, and to judge whether the principles adopted are the most appropriate under the circumstances. We then review recent evidence which suggests that auditors have abandoned this objective in favor of advocating client-preferred principles. The results of a survey of public accountants employed by small CPA firms indicates that, in a scenario in which an auditor did not feel that the clients accounting treatment was the most appropriate under the circumstances but it was recognized as an acceptable alternative under GAAP, advocacy of the client-preferred approach is considered appropriate and is very likely to occur in practice. In less subtle cases (e.g., when the auditor did not feel that the clients treatment provided the best reflection of the economic substance of the underlying transactions), survey participants as a group were ambivalent regarding the appropriateness of client advocacy, and felt that subordination of judgment was likely to occur in practice. The results also indicate that engagement risk, or the risk that the firm will be harmed by aggressive behavior, affects judgments of both the appropriateness and likelihood of subordination of judgment. These findings suggest that auditors have adopted an ideology of client advocacy, within the constraints of engagement risk.

Ethical climate, goal interdependence, and commitment among Asian auditors

Purpose - The aim of this study is to examine the relations among organizational ethical climate, goal interdependence (cooperative vs competitive goals), and organizational and professional commitment among auditors in Asia. Design/methodology/approach - The authors conducted a field survey of 293 auditors employed in two offices of an international accounting firm: one in Hong Kong and one in Singapore. Findings - Structural equation analyses indicate that instrumental ethical climates that focus on the pursuit of self-interest and firm profitability promote more competitive and less cooperative goals among auditors. Benevolent/cosmopolitan (public interest) climates appear to enhance cooperative goals among employees. Cooperative goals in turn were associated with increased affective and normative organizational and professional commitments. Competitive environments significantly reduced affective and normative organizational commitment as well as affective professional commitment. Compared with their Hong Kong counterparts, Singaporean auditors perceived the ethical climate in their firm to be more positive or supportive of ethical values, and also felt the work environment in the firm was more cooperative and less competitive. In addition, the Singaporean auditors exhibited somewhat higher levels of emotional attachment to both their firm and the public accounting profession. Originality/value - No prior accounting study has examined the influence of cooperative/competitive goals on work outcomes in a public accounting setting, or the role of ethical climates as potential antecedents of such goals. The results of the current study indicate that the development of cooperative and competitive goals is significantly related to the perceived ethical climate in public accounting firms, and that such goals may have significant effects on employee commitment not only to their organization but also to their profession. The significant differences between auditors in Hong Kong and Singapore have not previously been documented, and raise questions for future research.

Social responsibility, professional commitment and tax fraud

Purpose - – The purpose of this paper is to document relationships between accountants’ socioeconomic beliefs and attitudes and their professional commitment and ethical decisions in a domain-specific context. Specifically, it investigates the relationships among Chinese tax accountants’ level of belief in the importance of corporate ethics and social responsibility, affective/normative professional commitment and ethical judgements/intentions in a case involving client pressure to commit tax fraud. Design/methodology/approach - – The study employs a survey of tax practitioners employed by public accounting firms in China. The data are analyzed using linear regression and structural equation modelling. Findings - – The stakeholder view, representing both normative and practical support for the importance of corporate ethics and social responsibility, was strongly and positively associated with professional commitment among tax practitioners. The stakeholder view also exhibited a strong negative association with intentions to engage in tax fraud. Tax accountants who possessed higher levels of professional commitment judged tax fraud as more unethical, and such ethical judgements were associated with a lower likelihood of intending to engage in fraud. Originality/value - – The associations between: first, professional accountants’ beliefs in the importance of corporate ethics and social responsibility and their level of professional commitment; and second, professional commitment and tax professionals’ ethical judgements have received little attention in the prior literature. The findings of this study suggest that the integrity of public accounting services may be influenced by relatively broad socioeconomic attitudes, and that this effect may operate partially through commitment to professional values.

An Exploratory Study of Auditor Perceptions of Sanction Threats

The ongoing debate regarding the desirability of extending certain provisions of the Sarbanes-Oxley Act to auditors of nonpublic companies creates a need for a better understanding of the effectiveness of existing sanctioning mechanisms in the accounting profession. To provide input on this issue, the current paper reports the results of an exploratory study of perceived sanction threats among CPA/auditors employed by small public accounting firms. A survey of AICPA members in public practice was conducted to assess the perceived threat of sanctions for auditor acquiescence in a client earnings manipulation scheme. The results indicate that, prior to the passage of the Sarbanes-Oxley law, CPAs perceived a relatively high threat from many types of professional sanctions, and that most sanction threats appeared to act as a deterrent to fraud. However, the perceived likelihood of criminal conviction and CPA license revocation were relatively low. The findings also indicate that the materiality of the financial statement manipulation had a significant effect on all of the sanction threats examined, and the level of assurance on the financial statements affected perceptions of certain types of sanctions.

EFFECTS OF RESPONSIBILITY AND COHESIVENESS ON GROUP ESCALATION DECISIONS

This paper reports the results of an experimental study examining the joint effect of two group characteristics, responsibility and cohesiveness, on escalation of commitment in an ongoing unsuccessful project. Two levels (high/low) of group responsibility and group cohesiveness were manipulated to examine their effects on group escalation decisions. Forty-eight 3-member decision groups were formed and randomly assigned to four treatment cells with 12 groups in each cell. The results of a 2×2 ANOVA reveal a significant main effect of responsibility on escalation of commitment, as well as a significant interaction of responsibility and cohesiveness. Specifically, groups with both high responsibility and high cohesiveness committed the largest amount of resources to an ongoing unsuccessful project. These results provide support for the proposition that group responsibility and cohesiveness exert significant joint effects on group escalation of commitment in an ongoing unsuccessful project. The findings suggest that periodic changes of group membership to shift responsibility and cohesiveness may generate new attitudes and views to reduce group escalation of commitment.