Essay Extract - Ethical issues in education
Chapter 1: Introduction
This chapter explains the reason for this investigation and the aims of the study. An overview of the following chapters is also given.
Ethical issues have been the focus of media attention in recent months. Politicians have been accused of unethical behaviour, in the way they accepted election campaign donations. Educational institutions have been in the spotlight due to unacceptable practices and Haslam (2007) reported that teachers are being pressured to help students cheat to help meet league table grades.
Ethics is becoming increasingly important in business practice as well as academic and professional education. The accounting scandals in the past which involved the former energy company, Enron and former “big five” accounting firm, Andersen (Comunale et al, 2006); have led to the need to develop ethical standards in students which could then be transferred to their employment life. There is a need for ethical awareness and education for current and future accountants, as there can be serious consequences for unethical behaviour in business (Pollara 2008).
The accounting scandals in the past have been a major setback for the accounting profession and confidence in the profession has been lost. Ethical behaviour is seen as a way to improve the negative perception of the profession and the information provided.
Some writers have advocated the inclusion of an ethical module in academic degree programmes. According to Bampton and Maclagan (2005, p. 298) “universities should aim to produce graduates who are ethically aware and capable of making ‘right’ decisions. Thus it is essential that ethics is included in university courses including accounting and business.” It is no surprise that many universities are now offering an ethics module as part of their degree programmes.
The Association of Certified Chartered Accountants (ACCA) has realised the importance of ethics in the profession and have incorporated an ethics module in its new professional qualification (ACCA 2008). Accounting bodies also require members to comply with professional codes of ethics such as those issued by the International Federation of Accountants (IFAC) and the Auditing Practices Board (APB).
Ethics is important for the efficient performance of businesses and as a survey conducted by ACCA and CFO Research Services shows, companies with strong ethical cultures are more likely to achieve financial success (ACCA, 2008).
Ethical behaviour is of particular importance where judgement is required and options are not clear cut. Since the accounting and auditing regulations in the United Kingdom are mainly principles based, preparers of financial statements need to exercise judgement in order to present financial statements that give a “true and fair view”. Auditors are required to form an opinion on whether financial statements are prepared and presented properly and therefore need to maintain independence with regard to their clients and to be objective. This is expected to be done ethically to increase confidence in financial reports and the profession. The nature of the auditors work is such that they will face ethical issues on a regular basis. Auditor independence and conflict of interest have been identified as the main ethical issues faced by accountants (Jackling et al. 2007).
The study of the effect of gender differences on ethical perception and behaviour is important as there are increasing numbers of females in the accounting profession (Financial Reporting Council 2006). As a result the gender gap in the profession has been reduced. If gender differences exist then consideration must be given to such differences in formulating ethics programmes and ethical codes of conduct.
This study is aimed at examining the ethical perceptions and intentions of final year accounting students. In particular, the study aims to determine whether there is any difference in the attitude of male and female and if there are differences due the age of students. The reasoning behind ethical decision making will also be examined.
These accounting students will be the future accountants, auditors and business leaders (Geiger and O’Connell, 1998), and are will face ethical dilemmas in their careers that have to be addressed.
Chapter one gives an introduction to the area being investigated and the reason for the interest in this area.
In chapter two previous researches in the area of business ethics are summarised and two theories which explain the need for ethical behaviour are examined. In addition two fundamental theories on moral reasoning are discussed.
Chapter three sets out the research methods and approaches utilised in this study. A discussion of the way in which the data was collected and analysed will be given.
Chapter four deals with the presentation and analysis of the results and attempts to link the findings to theories and issues discussed in the second chapter.
Chapter five is the conclusion based on the results of the investigation. It also involves a discussion of the limitations of the present study and suggestions for future research.
Chapter 2: Literature Review
The purpose of this chapter is to discuss previous research in the area being investigated and the rationale for this specific area being studied. The first part of the chapter gives a brief description of business ethics and sets out the main accounting issues faced by accountants. The rest of the chapter examines the influences on ethical perceptions and behaviour, and the need for ethics in individuals and business. In addition, two well established approaches to moral reasoning will be considered.
There has been widespread interest in the area of ethics in accounting and in business. Previous studies on the ethical behaviour of accounting students have focused on students in the United States of America (USA) (Cohen et al. 2001). This study will consider the ethical perceptions and intention of Scottish accounting students based on accounting scenarios.
Ethics in Business
Ethics is an important concept in various aspects of life and there are numerous definitions and application of ethics. This study focuses mainly on business ethics and its application to an individual.
Velasquez (1998 p.15) describes business ethics as “a study of moral standards and how these apply to the systems and organizations through which modern societies produce and distribute goods and services, and to the people who work within these organizations.” These moral standards are concerned with deciding what is right and wrong (Beauchamp and Bowie, 1988), and may be determined by laws, religious and personal beliefs among others.
There are a number of areas in the accountancy profession where moral standards and ethical positions can be put to the test. The way in which accountants deal with these issues could have serious implications for the profession and the individual.
Accounting Issues
The International Federation of Accountants (IFAC), the global organisation for the accountancy profession addresses the main issues facing accountants, in its publication of the ‘Code of Ethics for Professional Accountants’ (IFAC 2008). Other accounting bodies also address ethics in their individual codes of conduct publications. The issues include integrity, objectivity and confidentiality.
Integrity
Accountants are required to be honest and straightforward in performing their professional duties this includes being just and fair and truthful (IFAC 2008). The accounting information prepared and presented should therefore not be misleading and should be free from significant misstatements and omissions (IFAC 2008).
Objectivity
Accountants are expected to be objective in carrying out their professional duties and according to the IFAC “should not allow bias, conflict of interest or undue influence of others to override professional or business judgments” (IFAC 2008 p.4).
In preparing financial statements certain matters require judgement, such as deciding on the accounting policies to be used and choosing estimates where a precise measurement cannot be determined (Auditing Practices Board 2008). The role of the auditor is to assess whether these judgements result in the financial statements giving a true and fair view. It is therefore important for the auditor avoid issues that would cloud their judgement. Auditors should be independent of the client and should avoid conflict of interest to maintain objectivity. These are threats to objectivity as identified by the IFAC include: accepting gifts from clients and having financial interests in the client’s business both of which should be avoided.
Confidentiality
Information obtained when performing professional duties should not be disclosed to third parties unless there is a legal or professional requirement to do so (IFAC 2008). Accountants have access to privileged information and their clients need to be assured that this information is uses appropriately.
Creative Accounting
Another issue that affects the accounting profession is that of creative accounting or earnings management.
Creative accounting is an accounting practice which takes advantage of the gaps in accounting rules and principles to misrepresent the financial position and performance of a company (Shah 1998). Creative accounting does not necessarily break any accounting rules but as Shah (1998) suggests, it goes against the spirit of accounting principles and rules.
Creative accounting is practiced for various reasons such as, to increase employee and management bonus and to boost a company’s share price (Clikeman et al. 2000).
Thus if performance is linked to accounting figures those responsible for preparing the accounts will be tempted to manipulate the figures increase their rewards. Organisations have been criticised for encouraging unethical behaviour, due performance measurements criteria. It is thought that managers and employees should be rewarded for ethical behaviour rather than financial results which can lead to the manipulation of accounting figures to meet targets.
Creative accounting impairs the integrity of accountants and opposes the IFAC Code of Ethics which requires accountants to be straightforward in carrying out their duties (IFAC 2008).
Clikeman et al. (2000) in their study of accounting students attitudes towards earnings management conclude that these students applied accounting rules to determine if a decision is ethical. These authors find that students judged earnings management that breaks an accounting rule as being more unethical than earnings management which does not break any obvious rules.
There are different influences on ethics in individuals including gender and age (O’Fallon and Butterfield 2005).
Gender
Gender differences in ethical decision making have been of interest to numerous writers, with research focussing on ethical judgement, behaviour, intent and awareness (O’Fallon and Butterfield 2005). In their review of recent literature on ethical decision making, these authors found little or no gender differences in twenty six studies while females are more ethical than males in sixteen studies.
Understanding gender differences is important since more females are entering the accounting profession and any gender difference could impact on the profession (Roxas and Stoneback 2004).
Sadler and Barac (2005) examine the ethical views of 1,068 South African final year accounting students and compared them with similar studies in Ireland and Australia. Students were asked to respond to six ethical scenarios involving acceptance of a bribe to defraud the tax authorities, underpaying taxes and obtaining illegal copies of an examination paper. The results show females are likely to act more ethically than males and that those males were four times as likely to accept bribes as females (p.121).
O’Leary and Radich (2002) also concluded that there is a significant gender difference in the ethical attitudes of accounting students. Their findings revealed men were almost four times more likely than women to accept bribes.
This view of gender differences is also supported by Glover et al. (2002) who used a laboratory format with a decision exercise to examine business students’ workplace values, the results show that women had more ethical concerns than men regardless of the situation.
Gender Socialisation Approach
The difference in ethical values among genders may be explained by the gender socialisation approach. This theory suggests that men and women have different values and traits which cause them to view moral situations differently and will reflect in their decisions and practices (Roxas and Stoneback 2004). Therefore, given the same conditions men and women will behave differently and men are more likely to behave unethically. This is because men are more competitive, placing more value on money and power while women are more focussed on harmonious relationships and helping others (Sadler and Barac 2005).
Men consider ethical decisions in terms of justice and individual rights while women are more concerned with caring, relationships and compassion (Dawson 1995). His study shows men are unwillingly to break a promise on compassionate grounds. Men were unwilling to sell a scarce item to the parent of a sick child because the item was set aside for another customer. On the other hand, women were more willing to break their promise out of compassion for the sick child in the scenario.
There is some evidence to suggest that women are more likely than men to consider how their actions will affect others when making ethical decisions, as they care more about others than men (Glover et al. 2002).
Other studies have found no significant differences between male and female respondents.
Based on ten ethical scenarios, Loo (2003) concludes that there is no significant difference between male and female respondents but that there are some gender effects in relation to judging ethical behaviour.
Geiger and O’Connell (1998) and Malone (2006) also support the view that there are no gender differences in ethical perceptions; if differences exist they are minimal. They conclude that men and women generally view ethical situations in a similar manner and are likely to respond to ethical dilemmas in the same way.
Structural Approach
The view that there is no gender difference in ethical decision making is supported by the structural approach in psychology. This approach contends that men and women may bring different values to the workplace but these differences will disappear as they adjust to their roles (Geiger and O’Connell 1998). Thus with time men and women will behave similarly in performing their professional obligation as the reward and incentive systems force them to develop similar ethical attitudes (Communale et al. 2006).
These mixed results may be due to the argument that ethical attitudes and behaviour are situation specific (Roxas and Stoneback 2004, Geiger and O’Connell 1998). They suggest that some situations may cause differences in ethical behaviour due to gender while others may not.
Age
Experience may influence ethical behaviour, as individuals face more ethical dilemmas they should be better prepared to respond in the future if they can learn from the past. More experienced professionals are likely to make better moral decisions than less experienced professionals, this may indicate that age affects ethical views (O’Leary and Stewart 2007).
Su (2006) also finds a link between age and ethical awareness and suggests that older students are more ethically aware than younger students.
The difference in ethical decision making due to age may be explained by Kohlberg’s theory of cognitive moral development. Velasquez (1998) states that there are six stages in the development of an individual’s ability to deal with ethical issues.
At the first two stages right and wrong are determined by the reward or punishment that will follow the action. At stages three and four an action is determined by the need to maintain the expectations of families, friends and the society.
Stages five and six are the higher levels of moral development where individuals no longer accept values and norms. They will question these values and view situations in a way which takes account of all those involved.
At the early stages of moral development a cost benefit analysis is used to resolve ethical dilemmas, at the middle stages laws and duties will be applied while at the advanced stages the individual will apply personal principles (Clikeman et al. 2000).
As people get older they should advance to the stages and should therefore behave more ethically.
Culture, Risk of being caught and Education
Other factors that have been found to influence ethical judgement will be discussed here.
Su (2006) concluded that ethical perception in business practices is influenced by cultural differences. This view is supported by Peppas and Yu (2007), who compared the responses of US and Chinese graduate and undergraduate business students, to a set of business ethics value statements. They conclude that there is a significant difference between the US and Chinese students in seven of the eight statements; this difference reflects the cultural difference between both countries.
Individual attitude towards unethical behaviour changes when there is a risk of being caught (O’Leary and Cotter 2000; O’Leary and Radich 2000; Sadler and Barac 2005). The number of individuals who are prepared to act unethically will decrease if there is a risk of being caught. This suggests that people who engage in unethical behaviour may not seriously consider the consequences of such actions and might feel that they will not be exposed.
Universities and professional accounting bodies are increasingly including business ethics education in their curriculum in an attempt to increase students’ ethical awareness; and ultimately to improve their ability to make the right decisions when faced with ethical dilemmas in their professional life.
Geiger and O’Connell (1998) conclude that taking a course in ethics does not have a dramatic effect on the students’ ethical perceptions but suggest that it may be possible to identify and develop the types of training that will have a significant effect on these students.
Higher education institutions may not be teaching business ethics correctly; it may be necessary to include a separate business ethics module for at least a semester in order to improve effectiveness (Allen et al. 2005).
Although it appears that ethics education does not dramatically improve ethical attitudes there is evidence to suggest that a separate ethics module in higher education may increase the ethical awareness of students (O’Leary and Cotter 2000).
The Need for Ethical Behaviour
The accounting profession can be seen as one in which great reliance is placed on the work of its members by interested parties. Investors rely on the information provided published reports to assist them in making informed investment decisions. Creditors also use this information to determine whether businesses are able to meet their financial obligations. There are various theories that explain the need for ethical behaviour among professionals. Agency and stakeholder theories will be discussed here.
Agency Theory
Agency theory explains the relationship between a principal and an agent. Jensen and Meckling (1976, p.308) define the relationship as “a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent.”
Managers have a responsibility, as agents of shareholders (principals) to maximise shareholder wealth and are expected to act ethically in performing their duties (Culpan and Trussel 2005). They state that an assumption of agency theory is that there will be conflicts between the goals of both parties hence systems should be in place to align the interests of the agent and the principal. Managers, by their human nature, will be inclined to look after their own self interest (Shankman 1999).
Shareholders may find it difficult to monitor the actions of managers and are likely to rely on the work of auditors as a way of dealing with agency conflicts (Chan et al. 2007). The auditors therefore have an obligation to shareholders and are expected to act ethically and be objective in carrying out their duties. Shareholders rely on auditors to monitor the actions of managers and to give an assurance that managers are acting in the best interest of these shareholders.
Critics of the agency theory argue that a business does not exist solely for the benefit of shareholders. There are other groups having a ‘stake’ in the business and whose needs may be as important as the needs of the shareholders.
The respective duties of management and auditors should therefore extend to shareholders as well as other stakeholders.
Stakeholder Theory
Johnson et al. (2006 p.179) describe stakeholders as “those individuals or groups who depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends.” These stakeholders include suppliers, customers, employees, shareholders and the local community (Beauchamp and Bowie 1988). Stakeholder theory argues that managers should take into account the needs of stakeholders and not just shareholders (Jensen 2001). It is a very difficult task to satisfy all stakeholders; there are likely to be conflicts in the interests of all parties involved.
Managers, according to the Stakeholder Theory, have a moral obligation to take into account the interest of all stakeholders. However in attempting to meet the needs of all stakeholders the goal of maximising shareholders’ wealth may be unachievable. Employees are likely to require good wages and benefits package and suppliers may require prompt payment while shareholders require maximum returns on their investments. The higher the wages paid to employees the lower the profits available for distribution as dividends; a compromise may be needed to resolve these conflicting goals.
Accountants and auditors are expected to behave ethically because of the trust stakeholders place in them. Investors need to have confidence in the information provided by businesses and in the assurance given by accountants of the quality and integrity of this information, this is necessary for efficient financial markets (Sadler and Barac 2005).
It is believed that with more ethical accountants, pressure will be on managers to act in the best interest of the major stakeholders. If there is any indication that they are not considering the interests of these stakeholders, then this would be reflected in the published accounts and audit reports.
Moral Reasoning
Differences in ethical attitudes and behaviour may be due to men and women using different moral reasoning in making an ethical judgement (Loo, 2003). It is therefore necessary to discuss the moral reasoning used by individuals in decision making.
“Moral reasoning is the process of thinking by which a person arrives at judgments about the particular or general requirements of morality” (Bowie, 2002 p.102)
Individuals may use legal and regulatory frameworks as a guide in ethical decision making but their personal beliefs and values will affect their perception of what is ethical behaviour and what is unethical (Clikeman et al. 2000). These authors conclude that accounting students largely use accounting rules to determine whether an action is ethical or unethical, and need to be aware that ethical behaviour is more than just following rules as these rules do not cover every situation.
Theories on Moral Reasoning
Utilitarianism and Deontology are two of various theories in ethics which attempt to explain the approach used by individuals in ethical decision making.
Utilitarianism
Utilitarianism or Consequentialism theory developed by Jeremy Botham and John Stuart Mill argues that the right action to take is one which gives the best consequence (Micewski and Troy 2007). “Actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness. By happiness is intended pleasure, and the absence of pain; by unhappiness, pain, and the privation of pleasure” (Mill 1863 p.8)
This suggests that an individual should take an action if the benefits outweigh the costs and the action will result in the greatest happiness to most people (Granitz and Loewy 2007). Thus in making a decision for which rules exist, the utilitarian would consider the consequences of breaking the rules and weigh those against the benefits of doing so (Theobald 2005).
Utilitarians view the ethical action as a means to an end, the end being the consequences of the action. The end, it is thought, is more important than the means used to achieve it. According to Mill (1863 p.3) “all action is for the sake of some end, and rules of action, it seems natural to suppose, must take their whole character and colour from the end to which they are subservient. He went on to state “a test of right and wrong must be the means, one would think, of ascertaining what is right or wrong, and not a consequence of having already ascertained it” (p.3)
The Utilitatarian theory seems to justify unethical behaviour on the basis of a good outcome, that is, a greater number of people benefit than those who suffer. For instance, an auditor could justify an unqualified audit report if such report would prevent the company becoming bankrupt, even if this is against auditing principles.
The problem with utilitarianism is determining what constitutes the greatest happiness. Achieving greatest happiness for one set of stakeholders may have an adverse effect on another group of stakeholders. The rights of the individual may also be overlooked in determining the greatest good for the greatest number (Agarwal and Cruise Malloy 2000).
Deontology
Another theory explaining the reasoning behind ethical decision and actions is the deontological approach made popular by Immanuel Kant. Deontology views ethics as a duty and focuses on the action and not the results or consequences of such action. Deontologists oppose the view that consequences are more important than the action itself.
The consequences are unimportant as long as the action conforms to duty (Brady 2006).
Kant believed that “a person faced with a problem should be able to respond consistently and in conformity with their moral principles and also feel comfortable with the decision being made in full view of others” ( Theobald 2005 p.249)
Deontology supports the view that individual rights should be respected in decision making and it utilises the individual’s perception of right and wrong as well as organisational policies (Granitz and Loewy 2007).
The deontological approach is rules or principles based and individuals following this approach tend to utilise business and professional codes of conduct in ethical decision making (Agarwal and Cruise Malloy 2000). With this approach any action that violates the professional code of conduct will be seen to be unethical. Thus an individual will look to established principles and rules to make an ethical judgement and to take action and will not knowingly engage in unethical behaviour.
The problem with this is rules do not exist for every situation thus a deontologist might be ethical in a situation where there are obvious rules or laws. They may however, find it difficult to make ethical decisions when judgement is required and the right choice is unclear.
Their may also be conflicting duties and one must take precedence over the others.
Having reviewed the relevant literature and the findings and conclusions of other authors the following hypotheses will be tested.
- Females will behave more ethically than male in the same situation
- Older students will make better ethical decisions than their younger counterparts
Chapter 3: Methodology
This chapter sets out the approach used to gather information; the method used to gather the information the reason for the choice of method and the limitations of the method used.
The research was conducted using both secondary and primary data. Secondary data is data that already exists and include journal articles, academic books and newspaper articles (Collis and Hussey 2003). The secondary research for this study utilised academic books and journals as well as data from accounting bodies’ websites. A review of the literature was conducted to gain understanding and insight into previous researches (Saunders et al. 2007) in ethics among accountants, and to gain knowledge of business ethics in general. The secondary data was also used to identify theories and ideas to be tested in the course of the research and to refine the research topic (Saunders et al. 2007).
The most recent sources of literature were used for the review although a few older materials were used to enhance understanding of key philosophies. Secondary data was used to formulate the questions used in the questionnaire to enable the collection of relevant data.
Although secondary data is useful in researches this data should be used with caution. The information was prepared by other authors and for purposes that may not suit the present study; it may also be outdated and unreliable.
Primary data is original data collected specifically for the research being carried out (Collis and Hussey 2003). There are numerous research strategies that can be used in gathering primary data; these include experiment, survey and case study (Saunders et al. 2007). The research techniques used to collect primary data include interviews, questionnaires and observations and should be determined by the research strategy adopted (Saunders et al. 2007).
The findings from the primary research were analysed and compared with previous researches and the theories identified through secondary research. This was necessary to determine whether or not these findings support those from previous researches and to provide possible explanations.
Survey Strategy
The survey strategy was chosen for this study because it was most appropriate given the nature of the research and the time available. This study involves examining ethical attitudes of individuals and identifying relationships between variables. The survey strategy facilitates the collection of quantitative data which can be analysed and used to suggest possible reasons for relationships between variables (Saunders et al. 2007).
Research Methodology
The aim of this study is to determine whether gender and age affect ethical attitudes based on existing theories. Thus the research methodology adopted for this study is the deductive approach as the ethical theories were first identified and then tested. A deductive approach to research involves the testing of hypotheses based on theories identified (Saunders et al. 2007). On the other hand an inductive approach would result in the development of theories from the data collected.
Research Method
A mainly quantitative approach was used to collect data for this study with the use of close-ended response format questionnaires. A quantitative approach to data collection involves gathering data to facilitate measurement and is highly objective (Collis and Hussey 2003). This approach was chosen to facilitate the measurement of the respondents’ ethical attitudes and to ensure results were comparable to previous studies. It also reduces the possibility of the researcher misinterpreting responses and including their own feelings in such interpretations.
Quantitative and qualitative analysis of the data was performed.
Research Techniques
The research technique used in this study was the questionnaire. A questionnaire is a list of structured questions used to obtain responses from a sample (Collis and Hussey 2003).
Questionnaires were chosen because they are useful for gathering data on attitudes and opinions, and for identifying relationships between variables (Saunders et al. 2007). This study examined ethical attitudes and the effect of other variables such as gender and age on ethical perceptions.
Questionnaires are less time-consuming than interviews and observations and a larger sample can be used (Collis and Hussey 2003). Data were gathered from a larger number of people in a shorter length of time than interviews would permit.
Questionnaires were more suitable than interviews as they are unlikely to be answered in a way that is considered desirable (Saunders et al. 2007). The questionnaires were self administered and because anonymity was assured respondents could answer the questions more freely and according to their own feelings. The moral issues examined in this study can be considered as being sensitive, thus respondents may not be open if they could be viewed as being unethical.
Primary research was conducted by administering questionnaires to accounting students at a college. The students were chosen because of their diverse background and experiences. A number of these students were already in accounting jobs while others will be entering the profession shortly. Twenty nine students responded to the questionnaires; thirteen males and sixteen females.
Limitations of Questionnaires
Despite the usefulness of questionnaires there some drawbacks associated with them.
Because the questionnaires were self administered respondents read and interpreted the questions themselves. There is a danger that the respondents may not interpret the questions as intended by the author and therefore give an inaccurate response. The researcher was not directly involved so the questions could not be clarified while the questionnaires were being completed.
Also because anonymity was guaranteed to respondents, follow-ups to gain insight into the reasons for their answers to the questions, were not possible. It was impossible to identify the respondents from the completed questionnaires.
Pilot Testing
A sample of questionnaires was piloted among a few colleagues to assess whether the questions and instructions were clear and to identify any errors. They were asked to comment on whether the questions and scenarios were clear and easily understood. No major problems were discovered and only minor adjustments were needed to enhance the appearance of the questionnaires.
Research Philosophy
The dominant research philosophy of this study is positivism as opposed to interpretivism. The process used in positivistic approach is to review existing literature to establish suitable theories and construct a hypothesis to be tested (Collis and Hussey 2003). Based on the review of literature one of the hypotheses to be tested in this study is: females will be more ethical than males in their responses to the scenarios in the questionnaires. The emphasis was on quantifiable data that could be analysed statistically and enable comparisons to be made (Saunders et al. 2007).
Questionnaires in detail
Questionnaires were designed to incorporate the theories discussed in the literature review in an attempt to test aspects of the theories. The aims of the questions were to determine if males differ from females in the way they viewed the ethical situations in the questionnaires and if different age groups viewed the scenarios differently.
Each questionnaire consisted of five ethical scenarios that accountants are likely to face. Both ethical and unethical decisions were included to ensure that the questions were read carefully. This was also done to prevent respondents from identifying a pattern and selecting similar options for each question.
Questions one and two were aimed at ascertaining the age and gender of the respondents, these are important for this study.
Questions three and four require information about employment status and educational level to identify trends in the responses for comparison.
Questions five to nine are ethical scenarios each followed by two-part questions using a four-point Likert-type scale (4 = most ethical action and 1 = the least ethical actual). The options were coded numerically, after the completed questionnaires were returned, to prevent respondents from identifying trends in the options.
Scenarios
The scenarios were designed to incorporate a variety of accounting issues addressed in the IFAC’s Code of Ethics.
It has been argued that the use of multiple scenarios is well able to capture an individual’s ethical position (Geiger and O’Connell 1998). Scenarios are useful to measure ethical awareness and attitudes and qualitative analysis can be performed to explore reasons for the responses to the scenarios (Schoenberg and Ravdal 2000).
The use of close-ended responses to the scenarios in the questionnaire was deemed appropriate. They allowed the present author to collect enough data to meet the aims of the research without being too demanding upon the respondents’ time (Weber 1992). The close-ended responses made it easier for data to be coded and manipulated statistically to identify relationships among variables (Weber 1992).
For part (a) of each scenario respondents were required to state the extent to which they agreed with the action taken: from strongly agree to strongly disagree.
This was assumed to be an indication of whether they viewed the situation as being ethical or unethical. That is, if they are aware of the ethical issues faced by accountants.
Part (b) was designed to gain insight into the ethical behaviour of accounting students. They were required to indicate the likelihood of them engaging in the same behaviour as those given in the scenarios.
In question five the auditor discovered a serious error in the accounts, but the directors were not willing to make the adjustments in the current period to avoid bankruptcy. The auditor had to choose whether to overlook the error in the current period or to mention it in the audit report. This is a test of the auditor’s integrity based on the IFAC professional code, the correct choice is to mention the error in the report. Respondents using the Deontological approach are expected to agree with the auditor’s action because the important issue is obeying rules not the consequences of the company becoming bankrupt (Agarwal and Cruise Malloy 2000, Brady 2006).
Utilitarians should disagree with the auditor’s action because the right action should minimise loss and maximise happiness (Mill 1863).
This scenario also establishes the extent to which respondents agree with unethical behaviour and their willingness to engage in such behaviour.
Question six deals with the issue of creative accounting where the accountant manipulated the accounts to show an increase in profits for personal gain. This question was designed to determine the extent to which respondents agree with manipulating accounts for personal gains. In addition it was aimed at determining if these respondents would engage in such behaviour.
Question seven addresses threats to objectivity: respondents willingness to accept gifts that could later affect their professional judgement (IFAC 2008).
The gender socialisation theory (Sadler and Barac 2005) was tested in question eight. This scenario is based on one used in research conducted by Dawson (1995). The manager had a choice between promoting an employee he had promised to promote and promoting another employee to help him overcome his grief.
According to the gender socialisation theory females are expected to agree with the manager’s decision to promote the grieving employee while males will disagree with the action taken by the manager.
This is because females are more caring than men and men would base their decisions on justice and fairness (Dawson 1995).
Question nine deals with the stakeholder/shareholder theory. The manager has adopted a shareholder approach (Jensen and Meckling 1976) being concerned about results that matter to shareholders and ignoring creditors. Those respondents applying the stakeholder theory (Jensen 2001) would disagree with the manager’s action on the grounds that the creditor is a stakeholder whose needs are as important as those of shareholders.
Questions ten to thirteen were designed to establish the moral reasoning generally used by the students to deal with ethical issues.
Questions ten and thirteen were aimed at establishing the extent to which students used the Utilitarian form of moral reasoning while questions eleven and twelve applied to the Deontological view.
Question fourteen was aimed at respondents who did not use any of the approaches given and also those who used a combination of different approaches.
Method of Analysis
Because the sample size was small (29) extensive statistical analysis was deemed inappropriate therefore mean and standard deviation were the main statistical tools used for analysis along with percentages. Because there were more female than male respondents, percentages were used instead of totals for better comparison.
Ethical Issues
The use of primary research involving human participants in this study has presented ethical issues that had to be addressed.
This study was conducted in accordance with the University of Northumbria’s guidelines for students undertaking undergraduate research.
Respondents were informed of the general purpose of the questionnaire and the way in which the information collected would be used. They were not obliged to answer any questions and consent was assumed by the return of completed questionnaires.
It was stated that all responses will remain anonymous and confidential. The estimated time to complete the questionnaire was also given.
Limitations of Research Process
The sample size used in this study is relatively small (29) therefore it may be inappropriate to generalise results. The results of this study may not be representative of the entire population of accountings students or accountants. The results therefore may not be conclusive.
The small sample size prevented the use of advanced statistical analysis used in other researches on ethical attitudes and behaviour. This prevented direct comparison with previous studies although comparisons were possible based on percentages and the limited statistical tools used in this study.
The sample was chosen from the same college this may not be representative of students from other colleges or universities. Choosing a sample from different institutions may have yielded more accurate and interesting findings. However, the sample chosen for this study is thought to be varied enough to provide valid and reliable data and conclusions.
The number of respondents in each age group was disproportionate which limits statistical analysis. In some age groups there was only one male and one female. To avoid revealing their identity the analysis for age and gender was done separately. It was therefore not possible to determine if there were any differences in ethical attitudes between younger and older females and between younger and older males.
The questionnaires contained accounting scenarios based on a review of the relevant literature. Some students may be unfamiliar with such situations and may respond differently to situations they are more familiar with (Geiger and O’Connell 1998). The author developed relatively simple scenarios that students should be able to understand and interpret. Some of the issues in the scenarios should be familiar to students based on the knowledge gained from studies in accounting and auditing.
The scenarios were developed by the present author and may suffer from researcher bias. The scenarios were based on the present author’s perception of ethical and unethical positions and may not have been adequate to gather relevant data.
The scenarios used in this study required close-ended responses to encourage participation. Open-ended responses that required respondents to explain the process used to resolve the scenarios, could have yielded more meaningful results (Weber 1992).
Chapter 4: Findings and Analysis
The total number of respondents was twenty nine, sixteen females (55.2%) and thirteen males (44.8%).
More than half (52%) of the respondents were between the ages of 16 and 25 years, the remaining 48 % was split evenly between the ages of 26 to 35 and 36 to 45 years.
More than half (62%) of the respondents were in employment, 17% of whom were in accounting related jobs.
Of the total number of respondents, 31% were enrolled on a Higher National Certificate (HNC) course, 34.5% were enrolled on a Higher National Diploma course, while the remaining 34.5 % were enrolled on an undergraduate degree course.
Question 5
Randy is auditing the accounts of Ambro plc, their oldest client. Randy discovered a serious error in the accounts and asked the directors to correct the error. The directors agreed to correct the error in the next accounting period. If the correction is done this year the company would become bankrupt. Randy disagreed and decided to mention the error in the audit report.
The results showed 90% of respondents either agreed or strongly agreed with the auditor’s decision to mention the error in the audit report. The respondents who either disagreed or strongly disagreed (10%) with the auditor’s decision were males, this represented 23% of males.
These results show that the majority of respondents identified the ethical choice correctly and they also indicated that they are likely to behave ethically in a similar situation.
The results also showed that men were more likely than women to behave unethically; 23% of males believed that the auditor’s should not mention the error in the audit report. This supports the findings of Sadler and Barac (2005), O’Leary and Radich (2002) and Glover et al. (2002). These authors conclude that there are significant gender differences in the ethical behaviour of accounting students and those males are more likely than females to behave unethically.
Although respondents were not required to state their reason for agreeing or disagreeing with the action taken, possible explanations be can be put forward.
According to the Utilitarianism (Mill 1863), the right decision is that which minimises harm and maximises happiness. If the company becomes bankrupt the shareholders and other stakeholders would suffer while the accounting firm would lose an old client. Utilitarians could argue that the auditor’s action would create unhappiness for most people involved and that the right thing to do is allow the error to be corrected in the next period.
Deontologists on the other hand would follow the rules regardless of the outcome and would take the action that conforms to duty (Agarwal and Cruise Malloy 2000). This duty according to IFAC (2008), is that auditors should not be associated with the misrepresentation of information contained in the financial statements.
There were differences in the choices among different age groups; 50% of respondents between 31 and 35 years of age disagreed with the auditor’s decision while 10 percent of respondents between 16and 20 years disagreed.
Question 6
Carol is preparing the accounts for Zenda plc and realised that the profit figure for this year is lower than last year’s figure. The company’s share price normally falls when there is a fall in profits. Carol will be retiring in the coming months and will sell her shares in the company at that point. Carol decided to reduce the provision for bad debts figure to increase profits.
The results for this scenario showed 79% of respondents disagreed with the action taken by the accountant. This indicate there disagreement with creative accounting and implies that they would not engage in such behaviour.
It is however worrying that 21 % of respondents agree with manipulating the accounts for personal gains.
A greater proportion of males than females (almost 3 times) agreed with the unethical decision taken by the accountant. Almost a third of male respondents agreed with the action taken although the proportion likely to take the same action represents 23% of males.
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