Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-17T17:57:33.774Z Has data issue: false hasContentIssue false
  • English
  • Français

Ethical Principles vs. Ethical Rules: The Moderating Effect of Moral Development on Audit Independence Judgments

Published online by Cambridge University Press:  23 January 2015

Terri L. Herron  and
David L. Gilbertson
Get access Rights & Permissions [Opens in a new window]

Abstract:

Recent calls have been made to move professional standards to a more principles-based perspective, supposing that emphasizing broad principles would eliminate the legalistic focus that rules may encourage, and accountants’ behavior would be more ethical and uniformly so. However, this supposition has yet to be empirically tested. The AICPA Code of Professional Conduct (Code) provides guidance in both forms: principles and rules. This experiment examines how the form of the Code affects independence judgments in a client acceptance context. We also examine the potential for levels of moral development to influence the effectiveness of the Code. We find that subjects are more likely to consider their independence impaired, and are more likely to reject a questionable audit engagement, when rules-based (principles-based) reasoners are provided with Code rules (principles). Given the popularity of the view that rules-based standards are undesirable, these findings have significant implications for the profession as principles-based ethical standards are discussed.

Type
Articles
Information
Business Ethics Quarterly , Volume 14 , Issue 3 , July 2004 , pp. 499 - 523
Copyright
Copyright © Society for Business Ethics 2004

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adams, B., Malone, F., and James, W.. 1995. “Confidentiality Decisions: The Reasoning Process of CPAs in Resolving Ethical Dilemmas.” Journal of Business Ethics. 14(12): 1015–21.Google Scholar
American Institute of Certified Public Accountants (AICPA). 1986. Restructuring Professional Standards to Achieve Professional Excellence in a Changing Environment. New York: AICPA.Google Scholar
American Institute of Certified Public Accountants (AICPA). 2002. Code of Professional Conduct, in AICPA Professional Standards. New York: AICPA.Google Scholar
Anderson, G., and Ellyson, R.. 1986. “Restructuring Professional Standards: The Anderson Report.” Journal of Accountancy, 162(3): 92–104.Google Scholar
Arens, A., and Loebbecke, J.. 2000. Auditing: An Integrated Approach, 8th edition. Upper Saddle River, N.J.: Prentice Hall.Google Scholar
Arnold, D., and Ponemon, L.. 1991. “Internal Auditors’ Perceptions of Whistle-Blowing and the Influence of Moral Reasoning: An Experiment.” Auditing: A Journal of Practice & Theory, 10(2):1–15.Google Scholar
Cheney, G. 2002. “Major Professional Associations Highlight Renewed Focus on Ethics.” Accounting Today (September 23–October 6): 14–7.Google Scholar
Cook, T., and Campbell, D.. 1976. “The Design and Conduct of Quasi-Experiments and True Experiments in Field Settings.” In Handbook of Industrial and Organizational Psychology, ed. Dunnette, M. D.. Chicago: Rand-McNally, 223–326).Google Scholar
Cushing, B. 1990. “Discussion of ‘Auditor Independence Judgments: A Cognitive-Developmental Model And Experimental Evidence.’” Contemporary Accounting Research 7(1): 252–60.CrossRefGoogle Scholar
Ferrell, O., and Fraedrich, J.. 1991. Business Ethics: Ethical Decision Making and Cases. Boston: Houghton Mifflin Company.Google Scholar
Financial Accounting Standards Board (FASB). 2002. Proposal: Principles-Based Approach to U.S. Standard Setting. File Reference No. 1125-001. Norwalk, Conn.: FASB.Google Scholar
Fishbein, M., and Ajzen, I.. 1974. “Attitudes Toward Objects as Predictors of Single and Multiple Behavioral Criteria.” Psychological Review 81: 59–74.Google Scholar
Fisher, D. G., and Sweeney, J. T.. 1998. “The Relationship Between Political Attitudes and Moral Judgment: Examining the Validity of the Defining Issues Test.” Journal of Business Ethics 17: 905–16.Google Scholar
Gaa, J. 1992. “Discussion of ‘A Model of Auditors’ Ethical Decision Processes.’” Auditing: A Journal of Practice & Theory 11(Supp): 60–6.Google Scholar
Gilligan, C. 1982. In a Different Voice: Psychological Theory and Women’s Development. Cambridge, Mass.: Harvard University Press.Google Scholar
Green, S., and Weber, J.. 1997. “Influencing Ethical Development: Exposing Students to the AICPA Code of Conduct.” Journal of Business Ethics 16: 777–90.Google Scholar
International Federation of Accountants (IFAC). 2003. Code of Ethics for Professional Accountants. New York. IFAC.Google Scholar
Jakubowski, S., Chao, P., Huh, S., and Maheshwari, S.. 2002. “A Cross-Country Comparison of the Codes of Professional Conduct of Certified/Chartered Accountants.” Journal of Business Ethics 35: 119–29.Google Scholar
Jones, T. 1991. “Ethical Decision Making by Individuals in Organizations: An Issue-Contingent Model.” Academy of Management Review 16(2): 366–95.Google Scholar
Kaplow, L. 1992. “Rules versus Standards: An Economic Analysis.” Duke Law Journal 42: 557–629.Google Scholar
Kohlberg, L. 1969. “Stages and Sequences: The Cognitive Development Approach to Socialization.” In Handbook of Socialization Theory and Research, ed. Goslin, D.. Chicago: Rand McNally, 485–546.Google Scholar
Lampe, J., and Finn, D.. 1992. “A Model of Auditors’ Ethical Decision Process.” Auditing: A Journal of Practice and Theory 11(Supp): 33–59.Google Scholar
Lindblom, C. K., and Ruland, R. G.. 1997. “Functionalist and Conflict Views of AICPA Code of Conduct: Public Interest vs. Self Interest.” Journal of Business Ethics 16: 573–82.CrossRefGoogle Scholar
Lord, A., and DeZoort, F.. 2001. “The Impact of Commitment and Moral Reasoning on Auditors’ Responses to Social Influence Pressure.” Accounting, Organizations, and Society 26: 215–35.Google Scholar
Louwers, T., Ponemon, L., and Radtke, R.. 1997. “Examining Accountants’ Ethical Behavior: A Review and Implications for Future Research.” In Behavioral Accounting Research: Foundations and Frontiers, ed. Arnold, V. and Sutton, S.. Sarasota, Fla.: American Accounting Association, 188–221.Google Scholar
Moriarty, S. 2000. “Trends in Ethical Sanction within the Accounting Profession.” Accounting Horizons 14(4): 427–39.Google Scholar
Murphy, P. 1989. “Creating Ethical Corporate Structures.” Sloan Management Review (Winter): 381–87.Google Scholar
Nelson, M. 2003. “Behavioral Evidence on the Effects of Principles- and Rules-Based Standards.” Accounting Horizons 17(1) (March): 91–104.CrossRefGoogle Scholar
New York State Senate, Higher Education Committee. 2002. The Purpose and Mission of 21st Century Accounting Firms and Independence of Certified Public Accountants in the Post-Enron Era (February 26). Testimony of Marilyn A. Pendergast.Google Scholar
Pearson, M. 1988. “A New Code of Professional Conduct for CPAs.” Ohio CPA Journal. Winter: 7–9.Google Scholar
Ponemon, L. 1990. “Ethical Judgments in Accounting: A Cognitive-Developmental Perspective.” Critical Perspectives on Accounting 1(2): 191–215.CrossRefGoogle Scholar
Ponemon, L.. 1992. “Ethical Reasoning and Selection-Socialization in Accounting.” Accounting Organizations and Society 17(3/4): 239–58.Google Scholar
Ponemon, L.. 1995. “The Objectivity of Accountants’ Litigation Support Judgments.” The Accounting Review 70: 467–88.Google Scholar
Ponemon, L., and Gabhart, D.. 1990. “Auditor Independence Judgments: A Cognitive-Developmental Model and Experimental Evidence.” Contemporary Accounting Research 7(1): 227–51.Google Scholar
Razaee, Z, Elmore, R., and Szendi, J.. 2001. “Ethical Behavior in Higher Educational Institutions: The Role of the Code of Conduct.” Journal of Business Ethics 30: 171–83.CrossRefGoogle Scholar
Rest, J. 1979. Development in Judging Moral Issues. Minneapolis: University of Minnesota.Google Scholar
Rest, J., and Narvaez, D.. 1998. Guide for DIT-2. Minneapolis: Center for the Study of Ethical Development.Google Scholar
Rest, J., Narvaez, D., Bebeau, M., and Thoma, S.. 1999a. Postconventional Moral Thinking: A Neo-Kohlbergian Approach. Mahwah, N.J.: Lawrence Erlbaum Associates.Google Scholar
Rest, J., Narvaez, D., Bebeau, M., and Thoma, S.. 1999b. “A Neo-Kohlbergian Approach: The DIT and Schema Theory.” Educational Psychology Review 11(4): 291–324.CrossRefGoogle Scholar
Robin, D., Gordon, G., Jordan, D., and Reidenbach, R. E.. 1996. “The Empirical Performance of Cognitive Moral Development in Predicting Behavioral Intent.” Business Ethics Quarterly 9(4): 493–515.Google Scholar
Schipper, K. 2003. “Principles-Based Accounting Standards.” Accounting Horizons 17(1) (March): 61–72.Google Scholar
Shaub, M. 1988. “Restructuring the Code of Professional Ethics: A Review of the Anderson Committee Report and Its Implications.” Accounting Horizons 2(4): 89–97.Google Scholar
Shaub, M.. 1994. “An Analysis of Factors Affecting the Cognitive Moral Development of Auditors and Auditing Students.” Journal of Accounting Education 12(1): 1–26.Google Scholar
Sweeney, J. 1995. “The Moral Expertise of Auditors: An Exploratory Analysis.” Research on Accounting Ethics 1: 213–34.Google Scholar
Sweeney, J., and Roberts, R.. 1997. “Cognitive Moral Development and Auditor Independence.” Accounting, Organizations, and Society 22(3/4): 337–52.Google Scholar
Trevino, L. 1986. “Ethical Decision Making in Organizations: A Person-Situation Interactionist Model.” Academy of Management Review 11(3): 601–17.Google Scholar
Weaver, G., and Trevino, L.. 1999. “Compliance and Values Oriented Ethics Programs: Influences on Employees’ Attitudes and Behavior.” Business Ethics Quarterly 9(2): 315–55.Google Scholar
Weber, J. 1993. “Institutionalizing Ethics into Business Organizations: A Model and Research Agenda.” Business Ethics Quarterly 3: 419–36.CrossRefGoogle Scholar
Weber, J., and Green, S.. 1991. “Principled Moral Reasoning: Is it a Viable Approach to Promote Ethical Integrity?” Journal of Business Ethics 10: 325–33.Google Scholar
Wright, G., Cullinan, C., and Bline, D.. 1997. “The Relationship between an Individual’s Values and Perceptions of Moral Intensity.” Behavioral Research in Accounting 9: 26–46.Google Scholar