the effect of organizational culture and ethical orientation on accountants ethical judgments
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The Effect of Organizational
Culture and Ethical
Orientation on Accountants '
Ethical Judgments
Patricia Casey Douglas
Ronald A Davidson
Bill N Schwartz
ABSTRACT. This paper examines the relationship
between organizational ethical culture in two large
international CPA firms, auditors' personal values and
the ethical orientation that those values dictate, and
judgments in ethical dilemmas typical of those that
accountants face. Using an experimental task con-
sisting of multiple judgments designed to vary in
moral intensity (Jones, 1991), and unique as well
as tried-and-true approaches to variable measure-
ments, this study examined the judgments of more
than three hundred participants in our study.
ANCOVA and path analysis results indicate that: {1)
Ethical judgments in situations of high moral inten-
sity are affected by personal values and by environ-
mental variables, such as the professional code of
conduct (direct and indirect effects) and previous
ethics instruction {direct effect only). (2) Corporate
ethical culture, and a relatively strong firm rules-
orientation, affect auditors' idealism but not rela-
tivism, and therefore indirectly affect ethical judg-
ments. Jones' (1991) moral intensity argument is
supported: differences in the characteristics of specific
judgment tasks apparently result in different decision
processes.
KEY WORDS: ethics, ethical judgment, ethical
orientation, moral intensity, organizational ethical
culture, personal values
The accounting community has been concerned
about professional ethics since the American
Association of Public Accountants first adopted
ethical rules in 1905 {Casler, 1964), and accoun-
tants' ethics have been subject to increased
scrutiny over the ensuing decades. Armstrong
(1987, p. 27) described the atmosphere in recent
years as a crisis of confidence and cre dibihty
for the profession. In particular, aspersions of
fraudulent fmancial reporting led the Treadway
Commission (1987, p. 23) to comment on the
combustible mixture of incentives and oppo r-
tunities to commit fraud and suggest that
personal values and codes of conduct are impor-
tant deterrents to such unethical acts {p. 35).
The Commission's recommendations were dis-
cussed more recently under a Wall Street ournal
headline asserting that ethics appear to be a
w rit e off for many executives {Blalock, 1996,
p. C l [discussing Brie f et al., 1996]). Brief et al.
found that the relationship between personal
values, codes of conduct and decisions to engage
in financial misrepresentation are weak at bes t
{p. 184). Arthur Brief (one of the study's authors)
calls this finding really disa ppo intin g {Blalock,
1996, p. Cl), and James Treadway {former SEC
commissioner and head of the Treadway
Co mm ission ) calls it very distressing {p. C1 3) .
Brief et al. (p. 193) also conclude that these
findings imply additional importance for the
Commission's other recommendation: creation of
a strong ethical climate within the organization,
characterized as essential to preventing unethical
acts {Treadway, 1987, p. 56).
This paper reports on a study of ethical
decision-making in public accounting, which
tests the Treadway Commissions' assertions about
the effect of an ethical organizational environ-
ment. The study investigated the effects of
personal values and other factors on accountants'
judgments of ethical dilemmas typical of those
encountered in practice. Factors include demo-
graphic variables, previous ethics instruction,
familiarity with the profession's code of conduct,
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102
Patricia Casey Douglas et al.
professional experience, position within the firm
and, most significantly, organizational ethical
culture as it is represented by perceptions of the
firms' shared values and practices.
ackground and hypothesis development
Models of the ethical decision process provide a
general consensus that two influences predomi-
nate in ethical decisions: they share the view -
point that ethical decision making in
organizations is a function of individual as well
as organizational factors (Akaah and Riordan,
1989, p. 113 [emphasis added]). Among the prin-
cipal conceptual models, Trevino (1986) focuses
on Kohlberg's moral development in her identi-
fication of individual influences, but Ferrell and
Gresham's (1985) and Hunt and Vitell's (1986)
models include the person l v lues of the decision
maker. Ferrel and Gresham (p. 89) include values
along with knowledge, attitudes and intentions
as primary influences on jud gm en t; H un t and
Vitell (p. 10) include them with in the dim en -
sions
of personal experiences. Both H unt and
ViteU (1986) and Trevino (1986) exphcitly posit
organizational ethical culture as an organ izational
factor influencing ethical behavior; Ferrell and
Gresham include it with significant others and
professional codes of conduct as secondary influ-
ences on judgment (p. 89).
Personal values
Personal values are a classification of the hun dred s
of thousands of beliefs that individuals con-
sciously or unconsciously hold about the world
in which they live (Rokeach, 1972, p. 1). Values
are distinguished from other beliefs by their
content. They are enduring beliefs that certain
modes of conduct (e.g., fairness) or end-states
of existence (e.g., equality) are preferable to the
alternatives (p. 160). Values guide jud gm en ts and
actions across specific objects and situations and
beyond immediate goals.
Despite such theoretical support, Brief et al.
(1996, p. 184) not e the pauc ity of em pirical
research addressing the potential relationship
between particular values that individuals hol
and engag eme nt in fraudulent behavior. Indee
Brief et al. (1991, p. 380) observed values to
related to ethical decisions only under condition
of low acc ounta bility (i.e., few pressures
justify one's opinions to oth ers [p. 382]). Th e
(1996) attempt to identify which of Rokeach
(1968, Values Survey ) eighteen term ina
(i.e., end -sta te ) values are associated wi
fraudulent financial reporting revealed on
modes t magn itudes of corr elati on (p. 188) an
weak and inconsisten t relationships (p. 19
with subjects' willingness to commit fraud.
Rokeach's Values Survey (1968) provides
generalized assessment of subjects' preferences f
a prosperous life, a world at peace, fami
security, etc. Forsyth's (1980) taxonomy of ethic
ideologies is more specific. As Forsyth describ
it, an individual's ethical orientation (i.e., ethic
value system) may be described most parsimo
niously by his position with respect to two bas
factors. The first factor is the extent to whic
he rejects universal moral rules in favor of
mo re relativist approach to moral decision
Relativists believe that there are many ways t
look at moral issues and are skeptical of specif
ethical principles (p. 175). The second factor
the extent to which an individual assumes th
good consequences always can be obtained (a
idealist approach) rather than adm itting th
consequences are often a mix or good and ba
(p. 176). In general, the stance an individual tak
with respect to these two factors will influenc
the ethical judgments reached (p. 183). Figure
presents the four possible ethical orientation
(i.e.,
combinations of high/low idealism an
relativism), labeled situationism, absolutism, su
jectivism, and exceptionism), with Forsyth's (199
descriptions.
Forsyth's taxonomy has proven useful i
explaining differences in moral judgmen
(Forsyth, 1980, 1992; Ar ringto n and Rec ker
1985;
Douglas and Schwartz, 1999; Douglas an
Wier, 2000) and sensitivity to ethical issue
(Shaub et al., 1993).
Conceptual models of ethical decision-makin
(e.g., Ferrell and Gresham, 1985; Hunt an
Vitell, 1986) suggest and prior research (e.g
Forsyth, 1981, 1992) demonstrates that person
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The Effect of Organizational Culture and Ethical Orientation
103
High Idealism
Low Idealism
Adapted from Forsyth (1980, 1992).
High relativism
Situationist
Reject moral rules; ask if the
action yielded the best possible
outcome in the given situation.
Subjectivist
Reject moral rules; base moral
judgments on personal feelings
about the action and the setting.
Low relativism
Absolutist
Feel actions are moral provided
they yield positive consequences
through conformity to moral rules.
Exceptionist
Feel conformity to moral rules is
desirable, but exceptions to these
rules are often permissible.
Figure 1. Taxonomy of ethical ideologies .
values provide the basis for moral judgments.
Previous contradictory fmdings (e.g., Brief et al.,
1991;
Brief et al., 1996) and the specificity of the
judgment task in this study (i.e., ethical dilemmas
specific to public accounting practice) make the
direction of the hypothesized effect an empirical
question. The first hypothesis is based upon this
line of reasoning and stated in the null form:
H Q I : Ethical orientation and ethical judg-
ments are not related.
Jones (1991) argues that differences in charac-
teristics of a moral issue itself its mor l intensity
affect individuals' responses to the issue. Models
of ethical decision-making that fail to consider
details of the ethical issue imply that individual
decisions and behavior are identical for all moral
issues. For exam ple, people will decide and
behave in the same manner whether the issue is
the theft of few^ supplies from the organization
or the release of a dangerous product to the
ma rket (p. 371). This is neithe r intuitively
correct nor consistent with the prior research that
Jones discusses (pp. 371-372).
Jones identifies the six characteristics of moral
issues indicated in Figure 2, which he aggregates
into a single moral intensity construct. Moral
intensity is expec ted to cha nge if there is a
change in any one of its components, although
it is impossible to precisely specify . . . the rela-
tionships between the moral intensity construct
and its co m po ne nts (p. 378). Jones argues that
these characteristics should be aggregated into a
single construct because they are all components
of the moral issue itself and are expected to have
interactive effects. He cautions that me asu re-
ment of moral intensity and its components is
probably possible only in terms of relatively large
distinctions (p. 378). There fore, this study
attempted to represent the moral intensity
variable at only two levels, high (i.e., high on
more than three of the six components) and low.
These variations in moral intensity were repre-
sented in the content of the vignettes developed
for this study as discussed later in this paper's
methodology section.
Becau se differences in jud gm en ts may result
from differences in the moral intensity of the
ethical issues under consideration, two additional
hypotheses were used to test for this effect:
H pla : Ethical orientat ion and ethical jud g-
ments in situations of high moral
intensity are not related.
H o l b :
Ethical orientation and ethical judg-
ments in situations of low moral inten-
sity are not related.
Organizational ethical culture
Organizational culture is, at its core, a system of
common values. Personal values begin to develop
early in Hfe and, like the more general beliefs, are
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104
Patricia Casey Douglas et al
1. Magnitude of consequences: the sum of the detriments or bene6ts done to victims or beneficiaries of
the act.
2. Social consensus: the degree of social agreement that the act is good or bad.
3. Probability of effect: the joint probability that the act will actually take place and that it will cause the
detriment or benefit predicted.
4. Temporal immediacy: the length of time between the present and the onset of the act's consequences.
5. Proximity: the feeling of nearness (social, cultural, psychological, or physical) that the moral agent has
for victims (beneficiaries) of the . . . act (p. 376).
6. Concentration of effect: an inverse function of the number of people affected by the act.
Figure 2. Com ponents of moral intensity.
organized into hierarchical systems with describ-
able and measurable properties and observable
behavioral consequences. Because personal values
are mo re central, or close r to [one's] person ality
than other constructs such as attitudes and
opin ion s (Ravlin and M eglino, 1987, p. 156),
they resist change to an even greater degree.
Early social-psychological theories of belief
systems (e.g., Rokeach, 1972) describe value
change as a cognitive process, the result of a
basic human need for cognitive consistency.
Modification of the personal value system was
thought to result from efForts to reduce a per-
ceived inconsistency among an individual's atti-
tudes, values and behavior, or between his and
some significant other's attitudes, values, motives
or behavior (p. 165). More recent belief system
theory (e.g., Grube et al., 1994, p. 156) postu-
lates that change is an ffective process, the result
of a need to feel self-satisfied with one's own
competence and morality. Both the cognitive and
affective perspectives are consistent with the
many studies reviewed in Grube et al. which
demonstrate that personal values can be changed
through a process termed value self confrontation
Individuals presented with feedback concerning
their own and significant others' values, attitudes
and behaviors are motivated to change values,
attitudes and behaviors not consistent and to
maintain those that are consistent with the
referent norm (p. 157). Both perspectives are
consistent with theories of socialization and
organizational culture.
Fogarty (1992, p. 130) defines socialization as
the process by which individuals are molded by
the society to which they seek full membership.
This mo ldin g requires a modification o
reflexes (i.e., person al values, attitude s an
behaviors) through instruction received in th
social environment. Business and profession
organizations shape themselves in response to th
demands of their environment and provid
members with incentives to adopt attributes con
sistent with that milieu. Socialization plays a
even more important part in professional org
nizations like accounting firms, where neith
employee behavior nor output relevant to th
desired performance is measurable. These org
nizations must rely on clan control (Ouchi, 19
1980) or the operation of strong common value
to control possible opportunism and the ineff
ciencies caused by incongruent individual an
organizational goals.
The system of common values that Ouch
(1979,
1980) describes is but part of the overa
organizational culture. Values are the core o
organizational culture, manifested in organiz
tional practices. Values describe what should b
while practices describe what is (Pratt an
Beaulieu, 1992, p. 668). Brief et al (199
p.
193) call it organ ization al climate - the 'fe
of an organization; [that is,] . . . the perception
of organizational members about how organiz
tions function a nd /o r what is imp orta nt in the
organizations. Perceptions of organization
culture are based upo n the conditions peop
experience in their organizations the even
practices, procedures, and rewarded, supporte
and expected behaviors that characterize th
organ ization (p. 194).
Organizational ethical culture or, more speci
ically, the ethical environment within the firm
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The Effect
of
Organizational ulture
nd
Ethical Orientation
105
created through management practices and
espoused values,
may be the
most important
deterrent to unethical behavior. The Treadway
Commission's (1987,
p. 56)
study
of
fraudulent
financial reporting concluded with respect to
public accounting firms that the tone that top
management sets is an essential factor in devel-
oping a strong ethical climate within the orga-
nization. In perhaps the only empirical study of
ethical culture or the in public accounting firms
to date. Finn et al (1988) fmd that by discour-
aging unethical behavior top management can
reduce the ethical problems that subordinates
perceive.
Ponemon and Glazer's (1990) results su ggest,
and Douglas
and
Schv^artz (1990) conf irm, that
socialization in the acc oun ting profession actually
begins during college with students' first
exposure to professional values and behavior.
Shaub
et al.
(1993,
p. 153)
find mixed evidence
of the ability of the organization to either
change
an
auditor's ethical orientation
to
match
its own, or to provide an environment that
closely matches an auditor 's norms. Ponem on
(1990, 1992) confirms the existence of a
selection-socialization mechanism operating to
control ethical reasoning
in
public accounting
firms. In essence, selection-socialization causes a
firm to hire and prom ote individuals who fit into
the prevailing firm culture and causes individ-
uals unable to fit into that culture to leave.
Jeffrey and W eatherho lt (1996) fmd no
evidence of differences in moral development
between accountants employed in private enter-
prise
and
those
in
public accounting,
or
among
Big Six auditors employed at different ranks
within their respective firms (i.e.,
no
evidence
of a sociahzation process with respect
to
ethical
decision-making
in
public acco unting firms).
They do find differences across offices of different
firms and across offices within
the
same firm,
suggesting the effect of organizational culture.
These theories
of
value chang e, se lection,
socialization, organizational culture - together
with prior empirical evidence from these and
other studies,' suggest that organizational ethical
culture may act to modify personal values within
the organization. The direction and magnitude
of effect would
be
determined
by
specifics
of
the
culture (i.e., particular practices
and
shared values
espoused). As we know of no previous study of
ethical culture within
CPA
firms that would
provide the specifics necessary to hypothesize the
direction
of
affect,
the
second hypothesis
is
stated
in the null form:
HQ2: Ethical orientat ion and organizational
ethical culture are not related.
Theo ry and evide nce discussed above also
suggest that organizational ethical culture may
affect individuals' judgment in situations with an
ethical component, and that the effect may be
either direct (e.g.,
the
result
of a
rules-vs-indi-
vidual judgment approach
on the
part
of the
firm, previous ethics training, or the strength of
professional codes
of
conduct)
or
indirect (e.g.,
the result of environm ental infiuences a cting to
shape the individual decision-maker's personal
values).
The
direction
of
this hyp othe size d effect
would be determined by the particular culture
and by specifics of the judg me nt task. Therefore,
the third hypothesis
is
also stated
in the
null
form:
H Q
Organizational ethical culture
and
ethical judgments
are not
related.
Again, separate hypotheses were used
to
test
for
the effect of differences in moral intensity:
HQ3a: Orga nizational ethical culture and
ethical judgm ents
in
situations
of
high
moral intensity are not related.
Ho 3b: Orga nizational ethical c ulture and
ethical judgments in situations of lo w
moral intensity
are not
related.
etho ology
Participants
in
this study were practicing accoun-
tants employed by two large, inte rnation al
accounting firms. Three hundred sixty-eight
auditors at various experience levels and positions
within the firms were tested in groups. Sixty-four
failed a man ipulation check built into the
experimental task
or did not
provide comp lete
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106
Patricia Casey Douglas
et al.
response sets,^ resulting in a usable sample of 304
(82.6 ).'
Testing of subjects was done under the
auspices
of
a supportive public accounting firm,
who provided access
and
time
for
testing
at
their
regularly-scheduled training sessions. Training
sites
are
located
in
California, Florida,
and
Washington, D.C.; however, participants for these
sessions come from all over the United States.
Data from 103 staff, 136 seniors, and 65
managers are included in this study although dis-
tribution across positions varies by firm. One
firm provided more staff participants; the other
firm, more managers. Experimental materials
comprised an anony mou s, self-administered
questionnaire with multiple measures, generally
considered
to be the
least obtrusive
way to
eUcit
sensitive information. Completion of the ques-
tionnaire took less than 20 minutes, so excessive
length would not be expected to reduce atten-
tion to the materials.
Table
I
presents statistics
or
frequencies
for
demographic variables. The typical particip
was a 26 year-old (range 22 to 37 years), m
(predominates by 56.3 ) Sen ior (45.0 ; Sta
33.5 ; Managers 21.5 ), witho ut
CPA
cert
cation (53.4 ). N ot e that
the
observed betwe
firm demographic differences are driven by th
rank distribution difference:
age,
gender, mar
status, professional certification, and professio
group membership are strongly correlated w
position
p <
0.0001). Of these, only gen
is correlated with a variable of interest h
(ethical orientation) and is discussed later in t
study.
Variables: Measures
of
ethical orientation
Forsyth's (1980) Ethics Position Questionnai
(EPQ, Appendix A) was used to measure ide l
an d relatimsm the tw^o basic factors that m
p a r s i m o n i o u s l y d e s c r i b e an indiv idua l ' s e th i
value sys tem,
as
previou s ly discussed.
The EP
TABLE I
Sample demographics
w =
304*)
Age***
Gender**
Marital status**
Position**
Professional certification**
Professional group membership**
Intend
to
remain with current firm
Intend to remain in public accounting
125 Female
(43.7 )
187 Married
(66.3 )
138
Yes
(46.6 )
165 Yes
(56.9 )
24 7
Yes
(84.6 )
256 Yes
(87.4 )
Mean 26.14 SD 3.06)
Range 22-37
101 Staff (33.5 )
136 Seniors (45.0 )
65 Managers (21.5 )
161 Male
(56.3 )
95 No t marr
(33.7 )
15 8
No
(53.4 )
125 No
(43.1 )
45 No
(15.4 )
37 No
(12.6 )
* Responses may not total 304 due to missing values.
** Be twe en -firm difference significant at p < 0.01 (chi-square test).
*** Between-firm difference significant
zt p <
0.001
(two-tailed f-test).
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The Effect of Organizational Culture and Ethical Orientation
107
presents a series of statements with w hich respon-
dents in the current study were asked to agree
or disagree on a nine point scale anchored
1 = Com pletely disagree and 9 = Completely
agree. Response s to idealism- and relativism-
specific statements were suninied to produce the
two variable scores.
The EPQ instrument has been used in prior
studies of both unde rgradu ate and g raduate
college students (Forsyth, 1980; Arrington and
Reckers, 1985; Douglas and Schwartz, 1999) and
practicing auditors (Shaub et al., 1993). AU attest
to the EPQs validity and psychometric proper-
ties.
Forsyth (1980), Arrington and Reckers
(1985), and Douglas and Wier (2000) demon-
strate that the measures can be used to explain
differences in moral judg me nts. Th e ins trum ent
as applied to current data again reveals that the
two dimensions are orthogonal (interscale cor-
relation of -0.10) and that the scales have
adequate internal consistency (Cronbach's alpha
of 0.84 for the idealism scale, 0.81 for relativism).
The idealism and relativism measures were
used to classify individuals into one of the four
ethical orientations, as indicated in Figure 1. This
was done using median splits of the idealism (five
subjects have the median score of 58) and rela-
tivism (15 subjects have the median score of 50)
scores. Because of the duplicated median scores,
the four orientations are not equal in size. The
split into high and low groups was made to make
the groups as equal in size as possible. This clas-
sification method results in 69 Exceptionists, 84
Subjectivists, 77 Absolutists, and 74 Situationists. *
Measures of organizational ethical culture
Hunt et al.'s (1989) five-item Corporate Ethics
Scale (CEP, Appendix B, Panel 1) was used to
measure perce ived organizational ethical culture th e
ethical environment w^ithin the firm created
through management practices and espoused
values - the ton e at the to p of the organiza-
tion. The CEP reflects the extent to which
employees perceive that managers act ethically,
are concerned about ethics in the organization,
and will reward or punish ethical or unethical
behavior (Bearden et al., 1993, p. 253). Hunt et
al. (1989) document the development of the five-
item scale used in the current study from a larger
pool of items (Hunt el al., 1984) and a sample
of over 1,200 respondents. Factor analysis and
coefficient alpha ^vere used to assess the dimen-
sionality and reliability of the scale. The CEP was
adapted for the current study only by substitu-
tion of the word firm for com pany in the
original as a concession to the organizational
structure of public accounting.
The five items in the CEP scale were summed
to form an overall index of organizational ethics
in the current study. Hunt et al. (1989) used a
seven-point response scale, but participants in this
study were asked to agree or disagree with its
statements on a nine-point scale to maintain con-
sistency with the EP Q and jud gm en t m easures.
This adjustment appears not to have affected the
scale's psychometric properties. Hunt et al.
(1989) reports Cronbach's alpha of 0.78, a uni-
dimensional factor structure, and beta coefficients
in models of CEP score and other factors as pre-
dictors of organizational comm itme nt r angin g
from 0.17 to 0.58 {p < 0.01) across four su b-
samples of the data. As applied in the current
study, data reveal Cronbach's alpha of 0 71 and a
unidimensional factor structure. Consistent with
the prior findings, a statistically significant cor-
relation (p = 0.0171) between CEP score and
response to a rough proxy, single-item measure
( intend to remain with current firm ) suggests
the CEP to be a predictor of organizational com-
mitment .
Other injluences
The five CEP questions in the questionnaire were
interspersed with others (Appendix B, Panel 2)
intended to assess and/or control for additional
environmental infiuences on personal values or
judgments suggested by the literature. They (and
their sources) are: explicitness of the firm's
policies, or a management emphasis on rules
versus jud gm en t (Brief et al., 1 991, p. 393); pro-
fessional involvement (Mayer-Sommer and Loeb,
1981,
p. 131); understanding of the profession's
code of conduct (Fulmer and Cargile, 1987,
p.
216); and previous ethics training in college^
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108
Patricia Casey Douglas et al.
(Hiltebeitel and Jones, 1991, p. 272; Arm strong,
1993, p. 90). Inclusion of CEP items with these
others provides a less obtrusive way to question
the sensitive area of firm policies and practices.
Measures of judgment
A series of vignettes portraying situations
involving conflicts of interest, confidentiality,
favors for clients, and lowballing were used to
elicit measures of ethical jud gm en t. The se
vignettes were developed using an established
technique for assessing their validity: develop
vignettes based upon the literature, submit
vignettes to a panel of experts, pretest the
vignettes on subjects similar in characteristics to
the sample population (Cavanaugh and Fritzsche,
1985). Each vignette describes a situation and a
fictitious CPA's action, and participants are asked
to agree or disagree with the described action on
the scale previously described.
Some of these vignettes were based upon those
originally developed by Loeb (1971, excerpted
for this study with permission of the Institute of
Professional Accounting) and since used by other
researchers (e.g., Armstrong, 1984); others were
developed by Cohen et al. (1994, used with per-
mission of the authors). The situations described
are typical of those CPA's frequently cite as
ethical problems confronted in practice (i.e.,
conflicts of interest, ind epe nde nce , and f
proble ms [Finn et al., 1988, p. 613]). Th
instrument was pretested on a separate sample
40 accounting practitioners.
Ethical dilemmas encountered in practi
vary in moral intensity; therefore, as Jones (199
theorizes, can be expected to elicit difFere
responses - albeit measurable only in term s
relatively large distinc tions (p. 378). Th erefor
this study attempted to represent the moral inte
sity variable at only two levels, high (i.e., hig
on more than three of the six components) an
low. These variations in moral intensity we
represented in the content of the vignettes deve
oped for this study, summarized in Figure 3.
The six moral intensity characteristics prese
a challenge in the construction of vignett
describing dilemmas within an accountin
context, as the researchers were unable to fin
any previous study which attempted to oper
tionalize or explicitly control for the construc
Follow ing Jones's (1991) theoretica l discussio
differences in magnitude of consequences, pro
ability of effect, and temporal immediacy we
established in the vignettes by use of quahtative
difFerent terms (e.g., ould rather than wilt . Soc
consensus within the professional community
reflected by prohibitions against certain practice
The researchers reasoned that proximity and co
centration of effect would vary (high to low
with the broad areas of the accountant's oblig
Moral intensity characteristics:
Magnitude of consequences
Social consensus
Probability of effect
Temporal immediacy
Proximity
Concentration of effect
Overall moral intensity rating''
# 1
L
L
L
L
H
H
L
# 2
L
L
L
L
L / H '
L /H
L
# 3
H
H
H
H
L
L
H
Vignette:
# 4
H
H
H
H
H
H
H
# 5
L
L
L
L
L
L
L
# 6
H
H
H
H
L /H
L /H
H
#7
H
H
H
H
H
H
H
Duplicates salient features of #4 - provided as a manipulation check.
'' Indicates midrange on a low-to-high continuum.
Figure 3. Variations in moral intensity in vignettes .
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The Effect of Organizational Culture and Ethical Orientation
9
tions represented in specific vignettes: obligations
to clients, to colleagues, and to the public.
The manipulated variable, moral intensity,
requires only two vignettes to represent the high-
versus-low possible states. However, Murphy and
Laczniak (1981, p. 262) suggest that an indi-
vidual s ethical decisions are represen ted best over
a variety of situations and decisions. Replication
also helps control for chance fluctuations in
responses. Therefore, three vignettes representing
each of the two states of moral intensity were
presented. An additional vignette that duplicated
the sahent features of one of the other six was
included to provide a manipulation check. Thus,
seven vignettes were presented to the subjects but
responses to only six comprise the judgments
measure.
Results
Tests of hypotheses
Table II presents results of univariate tests of
central tendency and association for demographic
and value-variables (i.e., idealism, relativism,
CE P) of interest. Significant betw een -firm dif-
ferences are evident in one measure of personal
values, but not in the other: mean relativism
scores between firms are statistically different;
mean idealism scores are not. As relativism and
idealism are significantly correlated with gender
(at p = 0.027 and p =
0 .001,
respectively),
between-firm gender differences are not likely to
explain the difference in one (relativism) but not
in the other (idealism).
Measures of idealism and relativism show no
significant correlation with age or position. In
fact, mean scores from these data are not statis-
tically different from those of a separate sample
of 21-year-old senior undergraduate accounting
students (Douglas and Schwartz, 1999). This is
an important finding because older subjects are
expected to be less idealistic and less relativistic
than younger subjects (Forsyth, 1980, p. 181),
and because an understanding of the socialization
process leads to the expectation that personal
values will be shaped by the organization over
time.
Also of particular interest to this study, the
measure of organizational ethical culture, the
CEP, show s a significant b etw een -firm difference
{p <
0.01) w hich cann ot be explained by
observed betw een -firm dem ograph ic differences.
CEP scores are significantly correlated with
position p = 0.015) but not with age {p = 0.160)
TABLE II
Univariate tests of central tendency and association
Variables
Idealism
Relativism
C E P
Firm
Position
Mean
5.72
4.97*
6.97**
n /a
n /a
Std. Dev.
1.39
1.36
1.26
n/a
n/a
Idealism
-0.103
(0.073)
0.198
(0.000)
0.017
(0.770)
-0.065
(0.255)
Correlation Coefficients
Relativism
-0.101
(0.079)
0.129
(0.024)
-0 .029
(0.615)
p
values)
CE P
0.148
(0.010)
0.140
(0.015)
Firm
0.614
(0.000)
* Be twe en- firm difference significant t p < 0.05 (tw o-tailed r-test).
** Be twe en-f irm difference significant at ;j < 0.01 (tw o-tailed r-test).
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Patricia Casey Douglas et al.
or gender (p = 0.953), despite these three demo
graphic variables' previously noted correlation.
The scores are significantly correlated with the
personal values measure, idealism p < 0.000), and
weakly correlated with relativism (p = 0.079).
This finding might indicate a mo dera ting effect
of organizational environment on personal values
consistent w^ith socialization theory were it not
for the previously discussed evidence implying
that personal values in these firins do not change
over time (i.e., idealism and relativism are not
significantly correlated with position, as would
he expected when values are shaped by an
organization).
To test H Q I , we used three separate analyses
of covariance (using SAS Proc GLM), as the
judgment score dependent variables are contin-
uous and the independent variable of orientation
is a classification variable while the four measures
of other influences (i.e., management emphasis
on rules versus jud gm en t, professional invo lve-
ment, understanding of the profession's code of
conduct, and previous ethics instruction) are con-
tinuous variables (Table III, Models 1 to 3). Of
the three models, only the model for high inten-
sity ethical judgments is significant (R^ = 0.071;
p
= 0.003). Ethical orientation is significant (F
= 2.93; p = 0.034), even after considering the
effects of other influences. The code of conduct
and ethics instruction variables are also signifi-
cant p < 0.05).
The null hypothesis HQI cannot be rejected in
its entirety: Ethical judgments in situations of
high moral intensity are affected by personal
values (i.e., ethical ideology), by some environ-
mental variables (i.e., understanding of the
professional code of conduct and previous
ethics instruction). Jon es' (1991) moral intens ity
argument is supported: differences in the char-
acteristics of specific judgment tasks apparently
result in different decision processes.
To ensure that the results using the classifica-
tion variable of ethical orientation are not an
artifact of the classification scheme, we reran the
analyses for
H Q I
using the continuous variables
of idealism and relativism instead of the orienta-
tion variable. We also included an interaction
term for idealism and relativism (Table IV).
Comparison of Tables III and IV, Models 1 to
3 indicates that the R^'s are virtually the same f
all models. However, the model for all judgmen
together now is significant
p =
0.044) as is t
interaction term p = 0.028). The only signi
cant ot he r influen ces variable is still ethi
instruction. For the high intensity ethical dec
sions,
the model is still significant
p =
0.004
but the interaction term is not p = 0.166). T
same two other variables are significant. Agai
the model for the low intensity ethical judgmen
is not significant.
Sensitivity analysis indicates that while the u
of ethical orientation produces virtually the sam
R 's and significant oth er influences terms
does use of separate idealism and relativism scor
for all models, there are some differences in t
significance of individual variables. Results f
the high intensity ethical jud gm en t mod
indicate that the classification of subjects in
ethical orientations makes a difference that is n
detected when using the separate value scores
As most studies employing Forsyth's EPQ u
separate idealism and relativism scores and do n
attempt to classify subjects into the four ide
logical groupings (thereby avoiding [as do
Forsyth himself] the attendant issue of what co
stitutes hi gh or low ideahsm and relativis
scores), this finding may indicate serious rese
vations for the less-complicated approach.
H Q2 was also analyzed with an ANCOV
model (Table III, Model 4). In this model, ethic
orientation is the dependent variable, perceive
organizational ethical culture (CEP) and the fo
other influences variables are the inde pende
variables. This model is marginally significa
(R^
=
0.037;
p =
0.047), but none of t
hypothesized independent variables are signif
cant at p < 0.05. Additional ANCOVA mode
deconstructed the ethical orientation variabl
using summate measures of idealism (Model 4
and relativism (Model 4b) as dependent variable
Model 4a is significant at p < 0.001 (R
=
0.071
CEP and firm emphasis on rules vs. judgme nt a
both significant p = 0.002 and 0.015, respe
tively). Model 4b shows no significant result
Clearly, corporate ethical environment, includin
a relatively strong rules-orientation, affects ind
vidual idealism but not relativism.
We tested Ho3, in which organizational ethic
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The Effect of Organizational Culture and Ethical Orientation
U l
culture is hypothesized to affect individu als'
j udgm en t in situations with an ethical compo-
nent, either directly (as a result of a rules-vs-in di-
vidual judg me nt approach on the part of the
firm, previous ethics training,
or the
strength
of
professional codes of conduct) or indirectly as a
result
of
wo rk-env ironm ent influences acting
to
shape the individual dec ision-maker's personal
values), using path analysis. Figure
4
presents
the
path model supported by these data: a recursive
causal model
of
accountants' ethical judgments,
depicting hypothesized direct and indirect rela-
tionships between corporate ethical culture
(CEP), oth er influences, and judgm ents, here
limited to situations of high m oral intensity. '
Because
the
ethica l ideology con struc t classifies
respondents into one of four categories not
suitable for this type of analysis, the continuous
variables, idealism and relativism, were used in
the path model. Significant paths are indicated
by one-way arrows and path coefficients indic ate
the magnitude of effect.
Table
V
summarizes
the
direct, indirect,**
and
residual effects of significant variables. Consistent
with
HQI
results previously discussed, significant
direct effects on judgments in situations of high
moral intensity
are
shown
for
idealism,
but not
for relativism. Also consistent with HQ2 results,
corporate ethical culture
CEP)
affects idea lism ,
but not relativism. CEP affects judg me nts both
directly
and
indirectly, through
its
effect
on
idealism, although the effect is not statistically
significant at^ < 0.05. Data confirm that the pro-
fessional code of co nd uc t direc tly affects idealism
p
< 0.05) and judgments p < 0.01), and indi-
rectly affects judgments, although again the effect
is not statistically significant p > 0.05). An
emphasis
on
rules
vs.
ju dg m en t directly affects
idealism {p < 0.01) and indirectly affects j ud g-
ments but at p > 0.05), and ethics instruc tion
directly affects judgements p < 0.01) only.
iscussion and conclusions
This study investigated auditors' ethical judg-
ments in situations typical of those they face in
practice. Results indicate that ethical orientation
is related
to
ethical judgments
in
high
but not
low) moral intensity situations. These results
suppo rt Jone s' (1991) issue-continge nt argum ent,
but appear counter to those of Brief et al. (1996)
who found little effect
of
personal values
on
ethical judgments. Brief
et al.
(1991,
p. 393)
observe that personal values
are
related
to
ethical
decisions only under conditions of low account-
ability. As Tetlock (1983,
p. 75)
explains this
phe-
nomena, individuals will tend towards
consistency with the views of those to w h o m
they are accountable if those views are known.
If they are not known , the individual has no
choice but to consider other options and tolerate
inconsistency - perhaps to rely on learned
responses (i.e., personal values).
Perceived organizational ethical culture
is
indirectly related to ethical judgments in our
results,
as
ethical cultur e affects in dividu al values
(i.e.,
idealism) and idealism affects judgments.
Extending Tetlock's (1983) logic,
the
moderating
effect of culture on judgme nt will be more pro-
nounced
if
the cu lture rather explicitly supports
distinct values. Individuals' summed responses to
CEP questions concerning firm values
in
this
study ranged from a m in im um of 13 (largely
to moderately disagree)
to a
maximum
of 45
(completely agree).
The
median score
was 36
(moderately agree) and the interquartile range is
31 (shghtly agree) to 40 (largely agree). These
findings may indicate uncertainty with respect
to what management values, and reliance
on personal values in lieu of organizational
ethical culture. Other environmental influences,
including the professional code of conduct , an
emphasis in the workplace on rules vs. individual
judgment , and previous ethics instruction signif-
icantly influence judgments. These
may
also
indicate
a
reliance
on
prior learned responses
in
the absence
of
a strong ethical culture.
Socialization theory leads us to expect an
eventual convergence of persona l values w ith
those of the organization. Firms mold their
members to fit the organizational environm ent,
or select
and
promote individuals
who
already
fit into the prevailing culture and cause those that
do
not fit to
leave.
The
cross-sectional data
of
this study show no difference in value measure-
ments among participants
at
different pos itions
(i.e.,
experience levels) within
the
firm. While
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112
Patricia Casey Douglas et al
TABLE III
ANCOVA analysis
Mo del 1: Dep end ent variable: Sum of ethical judg me nts (R- - 0.037
Source
Model
Error
Corrected total
Source
DF
7
296
303
DF
Sum of squares
575.12
14776.85
15351.97
Type III SS
Mean square
82.16
49.92
Mean square
F value
1.65
F value
P
0.122
P
Ethical orientation
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
212.09
9.44
10.42
45.79
238.09
70.70
9.44
10.42
45.79
238.09
1.42
0.19
0.21
0.92
4.77
Ethical orientation
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
0.238
0.664
0.648
0.339
0.030
Model 2:
Source
Model
Error
Corrected
Source
Dependent variable;
total
Sum of high intensity
D F
7
296
303
DF
ethical judgm ents (
Sum of squares
362.91
4745.35
5108.26
Type III SS
R^ = 0.
Mean
51
16
Mean
071)
square
.8 4
.03
square
F
F
value
3.23
value
P
0.003
P
Ethical orientation
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
3
1
1
1
1
140.99
0.26
5.81
108.32
69.25
47.00
0.26
5.81
108.32
69.25
2.93
0.02
0.36
6.76
4.32
0.034
0.898
0.548
0.010
0.039
Model 3:
Source
Model
Error
Corrected
Source
Dependent variable:
total
Sum of low intensity
DF
7
29 6
303
D F
ethical judgments
Sum of squares
97.79
7114.90
7212.68
Type III SS
( R = 0.014
Mean square
13.97
24.04
Mean square
F
F
value
0.58
value
P
0.771
P
3
1
1
1
1
17.53
12.85
0.67
13.25
50.53
5.84
12.85
0.67
13.25
50.53
0.24
0.53
0.03
0.55
2.10
0.866
0.465
0.868
0.458
0.148
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The Effect of Organizational Culture a nd Ethical O rientation 1 1 3
Tabk III Continued)
Model 4: Dependent variable; Ethical orientation (R —
0.037
Source DF Sum of squares Me an square F value
Model
Error
Corrected total
5
298
3 3
13 3
348 65
361 95
2 66
1 17
7
47
Source
DF
Type III SS Mean square F value
Corporate Ethics Scale (CEP)
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
0.96
3.13
0.40
4.10
0.20
0.96
3.13
0.40
4.10
0.20
82
2 67
34
3 5
17
366
1 3
56
62
681
Model 4a; Dependent variable; Sum of ideahsm measures {R^ = 0.071
Source DF
Sum of squares Mea n square F value
M o d e l
Error
Corrected total
298
3 3
4199 6
55271 68
5947 73
839 82
185 48
4 53 < 1
S O U R C E
DF
Type III SS
Mean square F value
Corporate Ethics Scale (CEP)
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
1
1
1
1
1
1863 68
1112 68
25 73
35 37
86 7
1863 68
1112 68
25 73
35 37
86 7
1 5
6
1 35
19
47
2
15
246
663
495
Model 4b: Dependent variable: Sum of relativism measures (R^ = 0.024
Source DF
Sum of squares M ean square F value
Model
Error
Corrected total
5
298
3 3
1362 74
55159 25
56521 99
272 55
55159 25
1.47 0.199
Source DF
Type III SS
Me an square F value
Corporate Ethics Scale (CEP)
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
1
1
1
1
1
681 27
14 56
58 12
278 18
288 57
681 27
14 56
58 12
278 18
288 57
3 68
76
31
1 5
1 56
56
384
576
221
213
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114 Patricia Casey ouglas et al
TABLE IV
Sensitivity analyses
Model 1: Dependent variable: Sum of ethical judgments (R^ =
0.047
Source
Model
Error
Corrected total
Source
DF
7
296
303
DF
Sum of squares
724.29
14627.68
15351.97
Type III SS
Mean square
103.47
49.42
Mean square
F value
2.09
F value
P
0.04
P
Idealism
Relativism
idealism*relativism
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
1
1
3
1
1
1
1
166.07
286.97
241.29
5.15
10.46
39.32
271.88
166.07
286.97
241.29
5.15
10.46
39.32
271.88
3.36
5.81
4.88
0.10
0.21
0.80
5.50
0.06
0.01
0.02
0.74
0.64
0.37
0.02
Model 2:
Source
Model
Error
Corrected
Source
Dependent variable:
total
Sum of high intensity
D F
7
296
303
DF
ethical judgments
Sum of squares
341.97
4766.29
5108.26
Type III SS
(R = 0.067
Mean square
48.85
16.10
Mean square
F
F
value
3.03
value
P
0.00
P
Idealism
Relativism
Idealism*relativism
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
1
1
1
1
1
1
1
9.55
41.77
31.09
1.29
5.41
101.34
71.67
9.55
41.77
31.09
1.29
5.41
101.34
71.67
0.59
2.59
1.93
0.08
0.34
6.29
4.45
0.44
0.10
0.16
0.77
0.56
0.01
0.03
Model 3:
Source
Model
Error
Corrected
Source
Dependent variable:
total
Sum of low intensity
D F
7
296
303
DF
ethical judgments {
Sum of squares
190.99
7021.70
7212.68
Type III SS
R =
0.026
Mean square
27.28
23.72
Mean square
F
F
value
1.15
value
P
0.33
P
Idealism
Relativism
Idealism*relativism
Emphasis on rules vs. judgment
Professional involvement
Professional code of conduct
Ethics instruction
1
1
1
1
1
1
1
95.98
109.77
99.14
11.59
0.82
14.41
64.36
95.98
109.77
99.14
11.59
0.82
14.41
64.36
4.05
4.63
4.18
0.49
0.03
0.61
2.71
0.04
0.03
0.04
0.48
0.85
0.43
0.10
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The Effect of Organizational Culture and Ethical Orientation
115
CEP
Emphasis
on Rules vs.
Judement
Code of
Conduct
Professional
Involvement
IDEALISM
•1691-f
RELATIVISM
JUDGMENTS
in situations of
high moral
intensity)
Ethics
Instruction
** * p < 0.001
p< 0.01
p < 0.05
Figure 4. Significant paths in the mode l of acco untan ts ethical judg me nts in situations of high m oral intensity.
value change can only be assessed by longitudinal
measures not attempted in this study, this current
result would not be expected if personal values
are shaped by the socialization process over time.
Ouchi (1979, p. 846) provides a possible expla-
nation, that organizational growth, turnover and
specialization all serve to undermine the organi-
zational socialization process. These conditions
are typical of pubhc accounting firms. It is also
possible that the group of respondents in this
study, although they come from three within-
firm
ranks,
may not have been in public
accounting long enough to demonstrate any
significant value congruence.
These data indicate that organizational ethical
culture is interpreted differently by different indi-
viduals in the organization. As previously noted,
individual responses to questions concerning firm
values ranged from fairly strong disagreement to
complete agreement. Dillard and Ferris (1989,
pp . 210—211) remind us
thzt per eption
involves
selection and organization of environmental
stimuli to provide meaning to experiences for the
perceiver. As each individual responds differently
and to different stimuli in the environment, indi-
viduals may perceive the same event, object, or
experience differently.
Of course, the fmdings of this study must be
considered in view of its hmitations. As we
previously pointed out, developing the ethics
scenarios to use was not a simple task. Despite
our conscientious effort and application of the
accepted procedures for developing vignettes to
be used in such studies (previously discussed), it
is possible that the scenarios used were not
appropriate to elicit a wide range of responses.
However, the different results between the high
and low intensity scenarios indicate that the
ma nipu lation was successful. In fact, this study s
operationalization of
Jones
(1991) moral inten-
sity theory in an accounting setting may be its
major contribution.
It is also possible, as Lord (1992) points
out, that our subjects did not feel accountable
for the judgm ents required by the experimen tal
task, so they may not have taken it seriously.
Again, accepted survey-research techniques
were followed to minimize this possibility.
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116
Patricia Casey Douglas et al.
TABLE V
Path coefficients in the m odel of acco untan ts' ethical jud gm ents in situations of high moral intensity
HQX Variable
Path coefficients:
Hola Idealism
relativism
Ho2 CEP
HO3a CEP
Emphasis on
rules vs. judgment
Professional code
of conduct
Ethics instruction
—*
->
—*
>
Variable
Judgments
Judgments
Idealism
relativism
Judgments
Idealism
relativism
Judgments
Idealism
relativism
Judgments
Idealism
relativism
Judgments
Direct
effect
- 0 . 1 3 3 * *
0 069
0.203***
-0 .098
- 0 . 0 7 3
0.148**
-0 .025
-0 .022
0.113*
0 052
-0 .169**
0 052
-0 .066
-0 .144**
Indirect
effect
-0 .028
-0 .021
-0 .016
Residual
-0 .006
0 004
0 003
- 0 . 0 0 2
0 029
0 003
-0 .021
0.019
0 024
- 0 . 0 0 5
0.019
0 004
- 0 . 0 0 3
0.001
Total
correlatio
- 0 . 1 3 9 * *
0 073
0.206**
-0 .010
-0 .072
0.151**
- 0 . 0 4 6
- 0 . 0 2 4
0.121*
0 047
-0 .166**
0 056
-0 .069
-0 .143**
** *
p <
0.001.
* * ; j < 0 0 1
*
p<
0.05.
Experimental materials comprised an anony-
mous, self-administered questionnaire with
multiple measures, generally considered to be the
least obtrusive way to elicit sensitive information.
Completion of the questionnaire took less than
20 minutes, so excessive length would not be
expected to reduce attention to the materials.
Each test administration was conducted under the
auspices ofa supportive accounting firm, lending
credibility to the task. By using a scenario
method, we probably do not elicit the same deci-
sions that respond ents might have made in rea l
situations. If the task design tech niques described
are unable to adequately control for unmeasured
variables, it may be necessary to use deception to
elicit responses that more accurately reveal what
subjects might do in real situations (Hooks and
Schultz, 1996).
Perhaps the most important fmdings of this
study are found in the ANCOVA models
(Table III), and confirmed by path analysis
(Figure 4; Table V). The summed ethica
judgment scores and the high moral intensit
judgment scores are related to ethics instruction
For participants in this study, that meant ethic
instruction during their college careers, as neithe
firm provides on-the-job ethics training for a
employees. High moral intensity judgment score
are also related to participants' understanding o
the professional code of conduct. These rela
tionships suggest that more ethical judgment
might be achievable through more instruction i
ethics and in the professional code of conduct.
Lastly, this study focused on organizationa
culture, although accountants are affected by th
organizational culture of their firms and by th
professional culture of public accounting. Whil
this study includes aspects of each, no attemp
was made to specifically measure the influence o
professional culture. This might be considere
in future studies.
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The Effect of Organizational Culture a nd Ethical Orientation 1 1 7
Appendix A: Ethics Position Questionnaire EPQ )
. A person should make certain that their actions never intentionally ha rm a nothe r even to a small degree .
2. Risks to anoth er should never be tolerated, irrespective of how small the risks might be .
3.
Th e existence of potential harm to others is always wrong, irrespective of the benefits to be gained.
4. On e should never psychologically or physically harm ano ther perso n.
5.
On e should not perform an action which migh t in any way threaten the dignity and welfare of ano ther
individual.
6. If an action could harm an inno cen t other, then it should not be don e.
7. Dec iding w heth er or not to perform an act by balancing the positive consequ ences of the act against the
negative consequences of the act is immoral.
8. Th e dignity and welfare of people should be the most imp ortan t conc ern in any society.
9. It is never nece ssary to sacrifice the welfare of others .
10. Moral actions are those whic h closely match ideals of the most "perfec t" action.
11 . Th ere are no ethical principles that are so importa nt that they should be a part of any code of ethics.
12. W hat is ethical varies from one situation and society to another.
13 .
Mo ral standards should be seen as being individualistic; what on e person considers to be moral may be
judged to be immoral by another person.
14. Different types of moralities cannot be com pared as to "rightness."
15 . Qu estio ns of wh at is ethical for every one can never be resolved since wh at is mo ral or imm oral is up to
the individual.
16. Moral standards are simply personal rules which indicate how a person should behave, and are not to be
applied in m aking judgm ents of others.
17 . Ethical considerations in interpersonal relations are so complex that individuals should be allowed to
formulate their own individual codes.
18 .
Rigid ly codifying an ethical position that prevents certain types of actions could stand in the way of better
human relations and adjustment.
19 . N o rule co nce rning lying can be formulated; wh ethe r a lie is permissible or not permissible totally dep ends
upon the situation.
20. W hethe r a lie is judge d to be moral or immoral depends upon the circumstances surrounding the action.
Appendix B: CEP and other influences
Panel 1: Corporate Ethics Scale (Hunt, Wood, and Chonko 1989)
• Manag ers in my firm often engage in behaviors that I consider to be un ethical.*
• In ord er to succeed in my firm, it is often necessary to comp rom ise one's ethics.*
• Top mana gem ent in my firm has let it be know n in no uncerta in terms that unethical behaviors will no t be
tolerated.
• If a ma nag er in niy firm is discovered to have enga ged in une thica l beh avio r that results prim arily in person l
gain (rather than firm gain), he or she will be promptly reprimanded.
• If a man ager in my firm is discovered to have engaged in une thical be hav ior that results prim arily in ftrm
gain (rather than personal gain), he or she will be promptly reprimanded.
Panel 2: Other influences
• M anag em ent generally stresses confo rmin g to rules rather than applying individual jud gm en t.
• I am very active in the profession, atten din g professional me eting s, reading professional public ation s, etc.
• I was exposed to a great deal of ethics or philosophy instruction durin g my college career.
• Th e ethics instruction I received in college was mo re philosophical than practical.
• I have a thoro ugh un derstand ing of the Professional Cod e of Co nd uc t.
Note: items that are reversed scored.
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118
Patricia Casey Douglas
et al
Appendix C Vignettes
Vignette
t: CPA
X is
approached
by a
prospective client,
a
current employee
o fa
large existing client c orp
ration. The employee discloses that personnel of the client organization are considering forming their own co
poration which could eventually provide competition
for
their employer.
Action;
CPA
X does not reveal the scheme to his client.
Vignette
#2 :
A chent of CPA X refers another client to X
and
indicates that he expects some small com pen s
tion from X for
his
services.
Action: X takes the client out to dinner.
Vignette U :
CPA
X is developing a
bid
for a major
new
client. The client
has
already expressed to X what h
expects the bid to
be.
X knows that the fee the chent demands is significantly below the cost of rendering th
services and that the audit will lose money in the first few years. However, the expectation is that the firm w
be able to raise the audit fee a few years down the road to generate a profit.
Action: X deliberately sets the bid significantly below cost.
Vignette
U4:
CPA
X serves as the auditor for Widget &
Co.,
a privately held firm. Widget's m arket share h
declined drastically, and X knows that W idget
wil
soon be bankrupt . Another of
X's
audit clients is So
Company. While auditing Solid's accounts receivable, X finds that Widget & Co. owes Solid 200 ,000. Th
represents 10 percent of Solid's receivables.
Action:
CPA
X warns th e client, Solid Com pany, abou t Widget's impen ding bankrup tcy.
Vignette
#5 : CPA X, in addition to practicing public acc ounting , is heavily involved in community activitie
X has been involved in the past with fund-raising efforts for the local sympho ny orchestra. In preparation fo
a proposal to an interna tional funding orga nization, tbe president of the sym phony has asked X to perform th
initial audit.
Action:
CPA
X accepts the audit engagement.
Vignette U6:
CPA X has had several me etings wit h a potential client, th e CEO of a very large and profita
company. The potential client asks X to arrange a position for his son as a staff auditor in another office of th
firm. Although the son is bright, he probably would not have otherw ise been given an offer.
Action: CPA X recommends making the potential chent's son an offer.
Vignette
#7:
While engaged in the audit of Lark Enterprises, a large client company,
CPA
X discovers that th
company intends to default on a major contract with another of
X's
client companies. Southe rn Compan
Southern's contract with Lark is its largest, and represents a significant share of its sales.
Action:
CPA
X
warns South ern ab out Lark's imp end ing default.
Acknowledgement Notes
Winner
of the
University
of
Oklahoma's
'
See Sims {1992, p. 511) for a listing of studies con
McLaughhn Prize
for
Research
in
A cc ou nti ng eluding tbat management ethics impacts employ
Ethics. fh'' ^-
- There were no significan t differences in
age,
yea
of experience in public a cco unt ing, office siz
gender, undergraduate major, being a CPA, in te
tion
to
remain
in
publ ic account ing, managem e
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The Effect of Organizational Culture and Ethical Orientation
9
emphasis on rules versus jud gm en ts, professional
involvement, and ethics training in college between
the usable and rejected instruments. There were sig-
nificant differences in positio n of respo nde nts, with
rejected instruments coming more from staff and
fewer from higher positions. More rejected instru-
ments came from respondents indicating that they did
not intend to remain with their current f irm.
Rejected respondents also displayed a higher level of
understanding of the Professional Code of Conduct.
This last difference is the only one that is difficult to
understand.
* A t 17 .4 percen t, this is only slightly highe r than the
5 to 15 percen t range of typica l consistency failures
Rest reports of studies using his instrument (Rest,
1987, p. 15). Following the logic of Rest's suggestions
for adapting the reported range to the shorter version
of the DIT, the higher failure rate in the current study
would be expected based only upon the larger
number of items in the instrument developed for this
study.
* As a sensitivity analysis, we also classified res po n-
dents into orientation by a median split but ignoring
the duplicated median scores. This resulted in 65
Exceptionists, 75 Subjectivists, 77 Absolutists, and 67
Situationists. We then reran all the models indicated
in Tables
III
and IV (not shown). Results were not
significantly different.
^ Neither firm provides on-the-job ethics training for
the employee ranks tested in this study.
^ We also conducted a sensitivity analysis using the
64 rejected instruments using the four models shown
in Table III. Results (not shown) were not signifi-
cantly different for any of the four models. We also
recomputed the three regression analyses reported in
Table IV including the 64 rejected instruments. There
were no significant differences in these regression
models.
' Su b- gr ou p analysis was again used to assess the
hypothesized moderating effect of moral intensity
on judgments, as suggested by Sharnia et al. (1981).
As in our previous findings, only the model of
judgments in situations of high moral intensity is
significant.
^ Indirect effects were calculated as suggested by
James and Brett (1984, p. 319): in a model of the form
X — m —¥ Y, the path coefficient lin king x to m is
multiplied by the path coefficient link ing m to y to
produce the indirect effect of x on y.
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Patricia Casey Douglas
Loyola Marym ount University,
7900 Loyola Blvd.
Los Angeles, CA 90045-8385,
U.S.A.
E-mail: [email protected]
Ronald A. Davidson
Arizona State University West,
Phoenix, AZ,
U.S.A.
Bill N. Schwartz
Virginia Comm onwealth University,
Richmond
VA ,
U.S.A.