Ethics, Moral Development, and Accountants-in-Training

VIOLET ROGERS and AILEEN SMITH

ETHICS, MORAL DEVELOPMENT, ANDACCOUNTANTS-IN-TRAINING?

(Accepted 9 July 2000)

ABSTRACT. This research investigates how ethical stages of development, locus ofcontrol, age, and gender separately and jointly affect ethical decision-making. Senior- andgraduate-level university accounting students are used to examine the link between moraldevelopment and ethical responses. Four accounting-environment vignettes are used in thesurvey. Two of the vignettes are more closely linked to the Code of Professional Conduct;the other two vignettes describe ethical dilemmas that are less code-driven. The expectationis that moral development, as measured by the Defining Issues Test (DIT), will indicate alink to expected responses on the vignette items not specifically covered by the Code.

Because an individual’s locus of control (LOC) may also be expected to have an impacton ethical decision-making, a LOC variable is examined. Based on a review of the LOCand ethics studies, the expectation is that internal LOC respondents would respond moreethically. Much of the ethical research has also included an examination of gender and agedifferences. However, the results have indicated conflicting evidence. This research alsoexamines the gender and age issues within the senior-graduate student accounting context.

Results indicate that gender is insignificant in the analysis. The LOC variable is signifi-cant on one of the vignettes. Additionally, the DIT P score is significant in another of thevignette decisions. Possible reasons for the results are discussed.

KEY WORDS: accountants, ethics, gender, locus of control, moral development

INTRODUCTION

What do moral development, locus of control, age and gender have to dowith accounting environment ethical decisions? It often has been suggestedthat moral development influences ethical decisions, but does the stageof moral development discriminate between ethical decisions made in arule-bound environment such as accounting? Perhaps other factors, suchas age, gender and an “internal” versus “external” locus of control, provideadditional discriminating power.

In order to further examine the ethical decision processes of futureaccountants, this study looks at the link between moral development, locusof control, age, gender, and accounting-environment, rule-based ethical? The research was financially supported by a Faculty Research Grant from Stephen F.

Austin State University.

Teaching Business Ethics5: 1–20, 2001.© 2001Kluwer Academic Publishers. Printed in the Netherlands.

2 VIOLET ROGERS and AILEEN SMITH

decisions. Such an exploration of decisions that are situation specific to arule-based accounting environment may help identify accounting domainspecific influences on ethical decision making.

LITERATURE REVIEW

Defining Issues Test

Kohlberg (1962) has proposed a six-stage model to reflect moral reasoning.The model describes reactions during stages 1 and 2 as those characterizedby obedience; reactions during stages 3 and 4 as those characterized bylaw and duty to a particular social order; and reactions during stages 5 and6 as those associated with judgments about equity and a belief that blindobedience to rules does not always lead to a moral decision. The six stagesare summarized in Figure 1.

PRE-CONVENTIONAL LEVEL (obedience)

Stage 1: Obedience: You do what you are told primarily to avoid punishment.Stage 2: Instrumental egotism and simple exchange: Let’s make a deal or only consider

the cost and/or benefits to oneself.

CONVENTIONAL LEVEL (law and duty to society)

Stage 3: Interpersonal concordance: Be considerate, nice and kind and you’ll get alongwith people. Focus is on cooperation with those in your environment.

Stage 4: Law and duty to the social order: Everyone in society is obligated and is protectedby the law. Focus in on cooperation with society in general.

POST-CONVENTIONAL LEVEL (judgments of equity and equality)

Stage 5: Societal consensus: You are obligated by whatever arrangements are agreed toand by due process and procedure. Focus in on fairness of the law or rule asdetermined by equity and equality in the process of developing the rule.

Stage 6: Nonarbitrary social cooperation: Rational and impartial people would viewcooperation as moral. Focus in on fairness of the law or rules derived from generalprinciples of just and right as determined by rational people.

Adapted from Louwers et al. (1997).

Figure 1. Six Stages of Moral Reasoning.

Using Kohlberg’s six-stage model, Rest (1979) developed the DefiningIssues Test (DIT), designed to capture the related six stages of moral devel-opment. According to Rest, the DIT parallels Kohlberg’s model, and thescores on the DIT can be used to determine the combined stages of eachperson’s ethical development. The “P score” is usually considered the most

ETHICS, MORAL DEVELOPMENT, AND ACCOUNTANTS-IN-TRAINING 3

important DIT score and is the score of interest in this research. The P score“is interpreted as the relative importance that subjects give to principledmoral considerations, that is, to Stage 5 and Stage 6 items” (Rest, 1987,p. 13).

Several researchers have examined moral development and ethicaldecisions of university students, with varying results. Armstrong (1987)compared moral reasoning scores of CPAs and university students ingeneral. The results indicated that the CPAs mean DIT score was notonly significantly lower than both graduate and undergraduate studentscores, it was also lower than DIT scores of adults in general. Armstrongquestions whether the university education experience “fostered continuedmoral growth” (1987, p. 33) in all cases. The differences observed mayinitially be a result of the self-selection process by students into theaccounting curriculum and then related to the structure of the trainingin the accounting discipline. These factors may be seen as a potentialhindrance to the development of moral reasoning of accounting studentsso that it is not similar to those in other university disciplines.

Ponemon and Glazer (1990) investigated accountants moral reasoninglevels by comparing students and alumni from two diverse universities.One was a liberal arts college, and the other was an American Assemblyof Collegiate Schools of Business (AACSB) accredited accounting degreeschool. The results indicated that the DIT scores of senior accountingstudents and accounting major alumni were higher than freshmen scoresfrom their respective schools. In addition, the DIT scores of those from theliberal arts institution indicated higher moral development than those fromthe more traditional accounting program.

St. Pierre et al. (1990) examined the relationship between moralreasoning level and university major. On average, students in the threenonbusiness disciplines scored higher on the DIT than did those fromthe business disciplines. Female accounting majors scored higher than (1)male accounting majors and (2) senior students from the other disciplinesstudied.

Icerman et al. (1991) examined the effect of major (accounting/business/nonbusiness), education level, age, and geographic variables onthe P score of 778 university students from the Southeastern region of theU.S. While age and years of formal education were significant in P scoredetermination, university major and geographic region were not.

Lampe and Finn (1992) examined the ethical decision processes ofaccounting students and auditors, using the DIT and ethical vignettes. The129 student subjects indicated a lower average P score for the DIT thanearlier studies.


Armstrong (1993) examined pre- and post-test moral developmentscores of students taking an ethics and professionalism course. Multipleethics topics and participation activities were included throughout thecourse. Students who had taken the ethics and professionalism course hada significantly larger increase in mean DIT score over the semester thandid the control group (i.e., Intermediate Accounting students). In addition,results indicated that the greater the exposure to the ethics courses, thegreater the increase in the DIT score.

Ethical development across university major (i.e., accounting, non-accounting business, and liberal arts) was examined by Jeffrey (1993)using Rest’s DIT. Using one university in the research, the scores ofaccounting majors indicated significantly higher ethical development thanthe other majors. In addition, seniors in the three majors indicatedsignificantly higher ethical development than the freshman or sophomoreclassifications of the majors.

Shaub (1994) examined DIT scores and demographic variables of207 auditors and 91 senior accounting students. The results indicatedhigher moral reasoning among women, individuals with higher GPAs, andindividuals who had completed an ethics course.

Eynon et al. (1996) examined differences between beginning univer-sity accounting majors in the U.S. and Ireland. The 95 U.S. students wereenrolled in a private, catholic, liberal arts university in the Midwest. TheU.S. students indicated an overall P score lower than those reported byearlier studies studying accounting students.

Jones (1991) discussed and critiqued existing theoretical models ofindividual ethical decision making and proposed research involving moralintensity. His critique illustrates that the DIT model ignores issue-contingent factors. The premise behind investigating moral intensity is thatmoral development may be issue contingent. Herein, the magnitude of theconsequences, the probability of effect, temporal immediacy, and concen-tration of effect are considered as related to moral judgments. He proposedthat generally people behave better when the moral issue is important thanwhen it is not.

The DIT P score expresses the sum of Stages 5 and 6 scores for eachindividual, converted to a percent. The P Score can range from 0 to 95.The mean P score from earlier studies, from the current study, and fromthe Rest data are shown in Table I.

The current study comprises accounting majors in their fourth or fifthyear of study. As discussed later, all participants were attending a regionaluniversity located in a southern state. As Table I indicates, the surveyparticipants reflect a lower P score when compared with other “accounting


TABLE I

Comparative Accounting Students’ DIT Scores

Studies Sample P Standard

Size Score Deviation

Ponemon and Glazer (1990) 31 37.3 11.8

St. Pierre et al. (1990) 69 43.4 13.5

Holt and Jeffrey (1991) 76 42.8 12.8

Icerman et al. (1991) 778 36.1 13.1

Shaub (1991) 91 41.3 17.5

Lampe and Finn (1992) 112 34.5 16.4

Jeffrey 76a 42.8 12.8

(1993) 57a 37.6 11.7

Eynon et al. (1996) 95 30.9 14.7

Current Study 90 30.5 15.2

Avg. College Student (Rest, 1986) 2,479 43.2 13.2

a 76 senior-level accounting majors; 57 lower division accountingmajors.

student studies.” Eynon et al. (1996) reported similarly low P score resultswhen surveying beginning university students majoring in accounting.

Several issues may be related to the lower P scores. Perhaps accountingstudents self-select into a field that they perceive is non-ambiguous andfilled primarily with clear cut ethical issues. Possibly the structure thatis often a part of accounting may entice less morally developed persons.Additionally, the students in our study achieved an average SAT score ofapproximately 980, which may not be representative of other accountingstudent research populations or even students in general.1 And, an addi-tional consideration may be that the students were not motivated by thesmall amount of extra credit points (i.e., 1–2% of the semester grade) toconscientiously complete the survey instrument. It should be noted thatstudents included in the survey were not exposed to a separate ethics andprofessionalism course. However, ethics and professionalism were coveredas approximately 10% of one university accounting course.

1 However, while the average SAT score for individuals entering U.S. colleges from1997–1999 was approximately 1,106 (SAT Table I, 1999), the average SAT score forBusiness and Commerce majors was 993 (College, 1999). A score of 993 (SAT Table II,1999) is also the average SAT score for students from the respondents’ area. Therefore, therespondents average SAT score is appropriately expected for the business discipline andthe geographical region.


Gender

The gender variable has been examined in a number of ethics studiesusing students as subjects. Over the last 15 years, many different surveymethods and diverse results have been reported based on the gender vari-able. Many of these studies indicated significant differences by gender onan ethics measure (Betz and O’Connell, 1987; Arlow, 1991; Kohut andCorriher, 1994; Harris and Sutton, 1995; Khazanchi, 1995; Lane, 1995;Smith, 1995; Mason and Mudrack, 1996; Malinowski and Berger, 1996).In these studies, the female subjects give the more ethical responses.However, many other ethics studies have indicated no significant differ-ence by gender (Friedman et al., 1987; Betz et al., 1989; David and Welton,1991; Stanga and Turpen, 1991; Mudrack, 1993; White and Dooley, 1993;Sikula and Costa, 1994; Jones and Kavanaugh, 1996; McCuddy and Peery,1996). Other studies have also indicated limited differences on the gendervariable analysis (Stevens, 1984; McNichols and Zimmerer, 1985; Miesingand Preble, 1985; Konovsky and Jaster, 1989; Borkowski and Ugas, 1992;Giacomino, 1992; Ruegger and King, 1992; Vorherr et al., 1995).

Accounting students have been the target population for several ethicsstudies that have used the gender variable in the analysis. Significant differ-ences by gender were reported by both Stanga and Turpen (1991) andAmeen et al. (1996), with the female accounting students supplying themore ethical responses. By contrast, Kwak and Ortman (1996) reportedonly limited differences on ethical considerations for the gender variable.

Locus of Control LOC)

The potential link between the personality variable Locus of Control(LOC) and ethical responses has been reported by a number of studies.Rotter’s (1966) LOC instrument is designed to assess how much control anindividual believes he/she has over outcomes in life. It is based on whetheran individual sees a causal relationship between his/her behaviors and thepotential outcomes of those behaviors. Aninternal person believes in acausal link between his or her own actions and the expected outcomes.Internals believe that the consequences of their lives are directly related tothe decisions they make and the actions they take. In general, they acceptresponsibility for what happens to them. Anexternal individual believesthat the expected outcomes are not linked to his/her efforts, but to thecontrol of luck, fate, or powerful others. They do not generally believein the acceptance of responsibility for what happens to them because theirbelief structure does not include a direct, causal link between the actionand the expected outcome.


Most of the LOC studies that have surveyed university students haveindicated at least some support for the internal/external distinction relatedto ethical decision making. Some research has generally indicated supportfor the belief that Internals will supply the more ethical responses (Hagertyand Sims, 1978; Terpstra et al., 1991; Jones and Kavanaugh, 1995;McCuddy and Peery, 1996). Other studies have found limited support forthe LOC variable in ethics research using university students (Hagertyand Sims, 1979; and Trevino and Youngblood, 1990). Additionally, otherstudies (Gewrin and Kohut, 1981; Bass et al., 1999; and Hagerty and Sims,also reported in the 1979 article) did not find ethical response differencesby the LOC variable.

Age

Age is often cited as an explanatory variable in the study of ethical issues.While some studies using non-student respondent groups have indicatedsignificant differences by age (Ricklefs, 1983; Longenecker et al., 1989),a review of the literature using university students, in general, indicateslimited or no evidence of age differences. Most studies of the under-graduate and graduate university students have reported limited differencesby age (Stevens, 1984; Miesing and Preble, 1985; Arlow, 1991; Borkowskiand Ugas, 1992; Ruegger and King, 1992; White and Dooley, 1993; andMalinowski and Berger, 1996). However, studies conducted by Mudrack(1993) and Kohut and Corriher (1994) reported no significant differencesby the age variable. There were also non-significant differences reportedby Ameen et al. (1996) using students majoring in accounting.

The age variable will be included to examine whether these accountingmajors indicate differences in their responses. While a variety of age classi-fication designations have been used in the reported research, a traditional(i.e.,≤ 24 years of age) versus nontraditional university age designation isoften used with university students.

METHODOLOGY

Subjects

Data for the analysis were collected with a self-report survey filled outby senior- and graduate-level university students majoring in accountingat an AACSB-accredited state university in a southern state. Each studentreceived a nominal amount of extra credit points for responding to thestudy (1–2% of their semester grade). Because the data were collectedin a classroom setting, there was a 100% participation in the survey. The


TABLE II

Respondent Demographic Information

Gender n Percent

Male 38 43.2

Female 50 56.8

Total 88∗ 100.0

Age Classification n Percent

≤ 24 years 61 67.8

≥ 25 years 29 32.2

Total 90 100.0

∗ 93 responses were collected, 2 were deemed unreliable by the DITscoring, and 1 was too incomplete to use. However, not all answered thegender demographic item.

respondents made up approximately 60% of the accounting majors fromthe fall-1997 through fall-1998, when the project data were collected.However, one survey was too incomplete to use and two of the surveyswere judged unreliable by the DIT scoring.

Table I reports that the average DIT P score, from the current study, was30.5. This result is lower than other studies discussed in this article. Asshown in Table II, approximately 57% of the subjects were female, and theaverage age of the students was 25 years. While an age of approximately 28is considered to be the average age for Master of Business Administration(M.B.A.) programs in the respondents’ region (Guide, 2000), the 25-yearaverage age of the subjects in the current study is expected since they werecomposed of senior and graduate-level students majoring in accounting(i.e., both the Bachelor of Business Administration, B.B.A. program andthe Master of Professional Accountancy, M.P.A. program).

Questionnaire

The questionnaire packet contained a four-part survey and an envelope.The four parts are completed in approximately 20–30 minutes. The firstpart requested responses to Rest’s three-part DIT survey. The second partof the survey requested demographic information. Table II shows the basicdemographic information for the respondents The third part of the surveypresented the four vignettes concerning potentially unethical accountingissues. Vignettes 1 and 2 were adapted from vignettes A and B of DeZoortand Lord (1994); Vignettes 3 and 4 were adapted from vignettes B andD to Flory et al. (1992, 299–300). After reading each of the four vign-


ettes, the subjects were requested to answer two specific questions: (1) Inyour opinion, how unethical/ethical was the individual’s actions? (Using aLikert scale of 1 = very ethical to 6 = very unethical) and (2) What is thelikelihood that you would take the same action as the individual? (1 = verylikely to 6 = very unlikely). The fourth part of the survey was Rotter’s LOCinstrument. After completing the packet of materials, each student sealedthe materials in an attached envelope and returned it to the researchers.

The use of vignettes has become popular in ethical research becausethe research can be focused on the relationship between various ethicalconcepts and behavior in an accounting environment context. Vignettespermit researchers to control the focus of the survey (Lampe and Finn,1992). After comparing business ethics studies, Cavanaugh and Fritzscheconcluded that “as a vehicle for investigating an individual’s ethical prin-ciples and ethical behavior, vignettes provide significant advantages overother instruments” (1985, p. 291). Combining the advantages of vignetteswith anonymous responses (i.e., the survey packet returned in a sealedenvelope without the respondent name supplied) allows the students agreater comfort level in frankly answering the survey items. The ego-incorporating nature of the survey items is another potential problem withethics research. Anonymity also addresses the potential problem that canresult when ego involvement produces halo effects (Flory et al., 1992).

Two forms of the questionnaire were used. Form “X” used a masculinename for the actor in vignette 1, feminine for vignette 2, masculine forvignette 3, and feminine for vignette 4. Form “Y” reversed the gendernames of the actors described in the vignettes (i.e., female-vignette 1,male-vignette 2, female-vignette 3, and male-vignette 4). These two ques-tionnaire forms were used to determine whether the gender of the vignetteactor had an effect on the ethical responses of the students. T-Tests indi-cated no significant differences in the responses of the students to thedifferent survey forms.

The vignettes used by the current study are constructed to either closelyparallel a rule/professional law (i.e. one explained in the Code of Profes-sional Conduct2) or a more ambiguous ethical situation (i.e., a situationnot covered by a specific code section). Figure 2 provides the context ofthe four vignettes. Vignettes 1 and 4 are designed to provide ethical consid-erations related to such external rules or principles. Since vignettes 1 and4 describe direct violations of the Code of Professional Conduct, all of the

2 Each Certified Public Accountant is bound by the Code of Professional Conduct andPublic Accountancy Acts. The Code is published by the American Institute of CertifiedPublic Accountants and the Public Accountancy Acts are published by each State Boardof Public Accountancy. Each CPA must follow the rules described in each.


Dilemma No. and Description Action Taken

1. Filing an accurate/inaccurate CPE Filed an accurate report

report with the State Board (ethical)

2. Reporting suspicion of potential Reported suspicion to

inventory manipulation audit manager (ethical)

3. Questionable credit extension Grants credit (unethical)

4. Manipulation of accounting records “Cooks the books”

to meet earnings forecast (unethical)

Figure 2. Four Vignette Dilemmas and Actions Taken

accounting majors are expected to answer similarly. Vignettes 2 and 3 donot contain situations related to specific guidance from the Code. “Codes”lend guidance in specific areas, but they cannot provide complete guid-ance for ambiguous decisions. Therefore, individuals with greater moraldevelopment are expected to make more ethical decisions. Since vignettes2 and 3 are ambiguous “gray areas,” the moral development of the indi-vidual student is expected to offer guidance concerning ethical responses.Therefore the need to use internal versus external guidance on Vignettes 2and 3 may produce greater variability.

Vignette #1 described a Certified Public Accountant (CPA) who, inthe process of renewing his/her CPA license was notified that s/he lackedContinuing Professional Education hours required for license renewal(required by Bylaw 2.3.3). S/he was faced with filing an untruthful reportversus a truthful report. The consequences of filing an untruthful reportincluded that lying is an act discreditable to the profession (Rule 501.)Vignette #1 described that the CPA took the ethical action and filed atruthful report.

Vignette #2 described a staff auditor involved in an inventory count. Thestaff auditor observed that the accountant from the company that he wasauditing accompanied him/her and recorded the tagged items that wereto be counted in the inventory test count. S/he was concerned that thecompany accountant might try to falsify the count. His/her ethical decisionwas whether or not s/he should report the suspicious behavior to someonein charge of the audit. Vignette #2 described that the staff auditor tookthe ethical action and reported suspicious behavior. Reporting suspiciousbehavior is related to the General Standards described in the Code ofProfessional Conduct.

Vignette #3 described an assistant controller faced with granting a ques-tionable credit decision for an old friend. The company s/he works for hasstrict credit policies. If the controller approves credit for the old friend, it


will probably be a violation of the strict policies. However, if s/he approvescredit, the company sales will increase and s/he will meet earnings fore-casts and receive a bonus. S/he has a daughter accepted into MedicalSchool and needs the money. Vignette #3 described that the assistantcontroller took the unethical action and granted credit to the old friend.Making ethical decisions is related to the General Standards described inthe Code of Professional Conduct.

Vignette #4 described a company controller asked to make/include erro-neous accounting entries for purpose of meeting earnings forecasts. Courtsmight consider such making/inclusion as fraud. Such actions would bea violation of Rule 102 (Integrity and Objectivity) and Rule 501 (ActsDiscreditable). Vignette #4 described that the company controller madethe unethical decisions to falsify records.

Analysis and Results

From 93 surveys, one was too incomplete to use in the analysis. The DITanalysis deemed two unreliable, leaving 90 responses for the analysis.The DIT offers subjects a means for objectively responding to importantissues within moral dilemmas. The instrument is designed to measure howsubjects at different moral developmental stages respond differently tostatements. For the analysis, the DIT P-score quartile ranks were used inthe regression analysis for the DIT variable (P score), as prescribed by Rest(1993, p. 21).

GenderThe results of the regression analysis indicate that gender is insignificanton all eight of the vignette decisions. Therefore, the gender variable wasnot considered for the remainder of the analysis.

AgeA traditional/nontraditional age classification was used for the analysis.Those students with ages of 24 years of less were designated as traditional;those greater than 24 years of age were designated as nontraditional age.

Locus of ControlBased on the assumptions of locus of control theory, an internal LOCindividual is more likely to accept responsibility for his or her actions. Theacceptance of responsibility for actions and the expected outcomes of thoseactions suggests that those with an internal LOC will respond more ethi-cally because of the link. On the other hand, an external LOC individualis less likely to accept personal responsibility for the consequences of


unethical behaviors, since externals do not believe in the link between theiractions and the resulting outcomes. Without the perceived link betweenactions and outcome expectancies, externals are less likely to respondas ethically. Rotter’s LOC instrument is used in the current research todesignate student respondents as either Internal or External.

For the analysis, those individuals who scored less than or equal to nineon the LOC instrument were designated as “Internals.” Those individualswho scored greater than or equal to 11 were designated as “Externals.”Those students who attained the median score of 10 were omitted, resultingin six responses being omitted from the analysis. Because the LOC variableis a continuous variable, this procedure was followed in order to have betterdiscrimination on the LOC variable.

The mean responses to the ethical decisions were the predictor variablesin the analysis, with LOC score (i.e., internal or external designation), Pscore (i.e., according to the quartile designation discussed earlier), andAge (i.e., designated as traditional or nontraditional) as indicator vari-ables. All of the eight decisions on the four vignettes were in the expectedresponse direction. Table III provides the response means on the eightethical decisions. Because the action taken by the actor in vignettes 1 and 2were ethical behavior, low means are expected. In comparing the responsemeans to decisions 1 and 2, the more ethical response did not occur onthe rule-directed behavior in vignette 1 (filing accurate CPE report). Themore ethical response mean occurred on vignette 2 (potential inventorymanipulation), which was a more ambiguous situation and was expected totap into the differences in individuals’ moral development levels. However,other variables may come into play, such as age, gender, locus of control,and GPA.

Since the actions taken within vignettes 3 and 4 are both unethical,higher response means are expected and indicate a more ethical choice.Mean responses were lower for decision 3 than for decision 4, indicatingthe students did not believe the questionable credit decision to be quite sounethical.

None of the responses to the first two vignettes (i.e., first four ethicaldecisions) indicated a significant difference at alpha≤ 0.05. Table IVshows the results of the significant results (α ≤ 0.05) of the stepwiseregression analysis for the eight decisions (i.e., the two decisions for eachof the four vignettes). The significant differences in the regression occurredon the second decision for vignette 3 and on the two decisions for vignette4. This was originally an unexpected result.

However, trends in the analysis results are evident. All of the studentsresponded similarity on the decisions for the first two vignettes when the


TABLE III

Mean Responses on Vignette Decisions

Decision n Mean∗ Standard

Deviation

1A 88 2.034 1.68

1B 88 2.057 1.68

2A 87 1.885 1.17

2B 87 1.943 1.11

3A 88 3.739 1.22

3B 88 3.852 1.38

4A 88 4.705 1.17

4B 88 4.341 1.41

∗ For decisions 1 and 2, the lower the response mean, the more ethicalthe response; for decisions 3 and 4, the higher the mean, the moreethical the response.

TABLE IV

Significant Stepwise Regression Results (α ≤ 0.05)

Vignette Items Variable Partial Model F-value p-value

R2 R2

3 – making a questionable credit decision

3-Bb LOC Score 0.05 0.05 4.58 0.04

4 – “cooking the books”

4-Aa P Score 0.08 0.08 6.61 0.01

4-Bb P Score 0.08 0.08 7.30 0.01

a Item A question: How unethical/ethical is the action?b Item B question: How likely are you to take the same action?

actors were taking ethical actions. Thus, it appeared easier to agree withethical actions and to predict that you would take the same ethical action.The differentiating results occurred when the students were consideringsituations where actions taken in the vignette were unethical. Respondingto unethical actions produced the significant differences. Perhaps, it is alsoeasier to disagree with unethical actions and to predict that you are moreethical than the participants described in the vignette, thus producing ahalo effect.


Decision 3BAs shown in Table IV, the discrimination on decision 3B was on the LOCscore variable. Table V shows the Duncan’s information for the responsesof Internals and Externals for 3B. The question asks “how likely are you totake the same action,” which in this case was an unethical one. There is asignificant difference in the responses of Internals and Externals. Internals,believing in the link between unethical/ethical actions and the resultingoutcomes of those actions, gave the more ethically sensitive response.This result is consistent with many other ethics studies that have examinedthe LOC issue with university students (Hagerty and Sims, 1978; Terp-stra et al., 1991; Jones and Kavanaugh, 1995; and McCuddy and Peery,1996). The results indicate that, when dealing with an ambiguous situationwithout specific Code-of-Conduct related guidance, the students relied ontheir beliefs concerning outcome expectancies.

TABLE V

Duncan’s Multiple Comparisons for Decision 3B (α ≤ 0.05)

LOC Score n Mean Duncan Groupings∗

Internal 42 4.191 A

External 40 3.600 B

∗ Those groups indicated by different letters indicate a significant difference.

Decision 4ABoth parts of decision 4 indicated significant differences for the PScore and the traditional/nontraditional age variables. Table VI gives theDuncan’s comparison information for these significant differences. Asindicated for the P Score differences, all responses are in the expectedorder. Those with higher moral reasoning scores, based on the DIT Pscore, have given the more ethically sensitive responses than those withlower moral reasoning scores. P scores for part 4A (“how unethical/ethicalis the action”), indicate that those individuals in the fourth quartile aresignificantly different from those in the first and second quartile.

The age variable also indicated marginal significance for decision 4A(p ≤ 0.10). The responses indicate that the nontraditional students (i.e.,≥ 25 years old) responded with significantly greater ethical sensitivitythan did the traditional-age students. The moral development variable (Pscore) contributed more to the variability in the responses than did the agevariable.


TABLE VI

Duncan’s Multiple Comparisons for Decisions 4A & 4B (α ≤ 0.05)

Decision 4A:

P Score n Mean Duncan Groupings∗≥ 47 9 5.444 A

35–46 21 4.952 A B

23–34 26 4.462 B

≤ 22 26 4.385 B

Decision 4B:

P Score

≥ 47 9 5.000 A

35–46 21 4.619 A

23–34 26 4.500 A

≤ 22 26 3.692 B

∗ Those groups indicated by different letters indicate significant difference.All groups denoted by the same letter are not significantly different fromone another.

Decision 4BThe second decision on 4 asked participants “how likely are you to takethe same action?” The action described in vignette 4 was an unethical one.Statistically significant results indicate that the primary factory present inthe results is that more morally developed participants were more likelyto agree that the action was unethical (p≤ 0.01). In addition, the age vari-able was marginally significant (p≤ 0.07), with nontraditional respondentssupplying the more ethical responses.

Vignette 4 involved manipulating accounting records/cooking thebooks. The scenario described a controller manipulating accountingrecords so that the company can meet an earnings forecast. Advancedmoral development individuals would be expected to find this intoler-able, especially if they agreed that current accounting rules prohibitingsuch behavior are fair and prescribed equally. Given that P Score resultsindicate a link between moral development and the ethical responses ofthe students, results are interesting.

Another possibility is that accounting students have been misled bysome experience toward greater belief in the notion that “cooking thebooks” is an acceptable decision. There may also be a potential “influence”factor being considered by the students because the actor in the vignette ishaving to consider a request of an unethical action that is “reported” tohave come from the CEO of the company.


Perhaps significant difference on vignette #4 (cooking the books)is more closely related to Jones’ (1991) moral intensity model, whichconcludes that “. . . people generally behave better when the moral issueis important than they do when it is unimportant.” As such, older moremorally developed accounting students are likely to understand that theaction taken in the vignette is wrong; whereas, lower developed studentsdo not see it this way. His model includes the magnitude of consequences(sum of harms), social consensus (degree of social agreement), proba-bility of effect (probability the act will take place and will cause harm),temporal immediacy (length of time between the present and the onset ofconsequences), proximity (feeling of nearness to the evil act), and concen-tration of effect (number of people affected by an act of given magnitude).Herein, moral issues of high intensity are more salient than those oflow intensity (pp. 380–381) because their effects are more extreme (i.e.,effects stand out or involve significant others). Vignette #4 (cooking books)contains elements suggesting influence of moral intensity. The action is“fraud,” easily understood as a criminal act (i.e., extreme) and significantothers are affected (i.e., family member).

IMPLICATIONS FOR FUTURE RESEARCH

Other discussion is prompted by the results. The question asked parti-cipants in Decision 3B was “How likely are you to extend question-able credit.” Internals were less likely to make an unethical choice thanexternals. What are the characteristics of the participants in the study? Theaverage age was 25, but are internals more likely to be older. If so, how aredifferences in generations affecting the results? Do Baby Boomers responddifferently than Generation Xers. Additionally, what are the surroundingcircumstances described in the vignette? How do environmental factorssuch as applying pressure affect decisions. Vignette 3 describes a controllerwho is faced with making an unethical decision. Pressure is applied in thatthe controller has a daughter who has been accepted into Medical Schooland has financial concerns. If the controller makes the unethical decision,he/she will receive a bonus; if not, he/she will not. What is the role ofpressure in ethical decision, he/she will receive a bonus; if not, he/shewill not. What is the role of pressure in ethical vignettes? Is pressure theimpetus to the compromise of ethics? Do some groups respond differentlyto pressure? All of these questions are worthy of future investigation.


CONCLUSION

This research examined the link between DIT P scores, LOC, and genderin ethical decisions of an accounting context. Although the gender vari-able was also considered in the initial analysis, no significant differencewas indicated. Results parallel other ethical research using universitystudents that has not found gender differences in the responses. This maybe evidence of the affect that the Code of Professional Conduct has onaccountants, even accountants-in-training in our universities. This struc-turing of the technical training, as well as the indoctrination of the Codeof Conduct may, as suggested by Armstrong (1987), affect both the self-selection process and the moral development path taken by those choosingthe field of accounting.

Although differences were expected on the non-code topics (vignettes 2and 3), the significant differences occurred on vignettes 3 and 4. The LOCscore results were as expected on vignette 3, with the Internals supplyingthe more ethical responses. The results on vignette 4 indicate that higherP scores are paired with more ethical actions. It is suspected that theintroduction of the CEO’s “desire to meet the earnings forecast” into thevignette may have introduced “gray” into what was originally assumed tobe a “black/white” decision.

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Ethics, Moral Development, and Accountants-in-Training