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MOSAIC Conference,University of Konstanz,

27-31 July 2009

Ethics to Accountants:Challenges of a Global Qualification

Devendra Kodwani, ACCA and Open University, UK

Marcia Schillinger, University of Education Weingarten, Germany

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Presentation plan

Introduction and aims ACCA’s approach to ethics/moral judgment

competence The Moral Judgment Test (MJT, Lind) Accounting Judgement Exercise (AJE) Analysis of AJE responses Conclusions, questions, way forward

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Introduction and aims

Accounting profession and importance of ethics and moral judgment competence

Primary aims are:– Describe ACCA’s approach to ethics/moral

competence– Discuss the results from AJE– Raise questions for future research

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Accounting profession and importance of ethics

Role of accountants in society– They produce accounting reports (communication

about economic conditions of firm, economy, and other organisation)

– Doctors/pathologists of financial condition of any organisation (they sign the health and death certificates for organisations)

– Accountants are gate keepers between the producers of information and users of information

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The Association of Chartered Certified Accountants (ACCA):

Some facts: Global qualification - 72% of ACCA members and students are

based outside the UK In over 170 countries ACCA students sit the same exams and

achieve the same qualification ACCA has 362,000 students and 131,500 members, with a network

of 82 offices and centres across the world Accountants for business - 60% of ACCA members work in the

corporate sector Benefit to the profession - ACCA has 57 global accountancy

partnerships around the world Over the past year, more than 210,000 students registered for

examinations online

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ACCA’s approach to sensitize students to ethical and moral issues

To gain ACCA qualification comprises:– 14 written exams – minimum three years of relevant professional

experience, and – a Professional Ethics Module.

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ACCA’s approach to ethics and moral competence

The ethics is integrated through the examined components in varying degrees.

The ethics content is examined in range of papers but one of the compulsory papers at Professional level called Professional Accountant specifically examines ethical and professional dilemmas through realistic case studies and discursive questions.

ACCA requires all the students to go through an Ethics Module which is done by students online.

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Ethics Module and Integration of Ethics

Although the Module is not formally examined in a paper, its completion is compulsory and its content has direct relevance for most Professional level examinations in particular to Professional papers on Corporate Governance and Ethics and Audit and Assurance.

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ACCA Five Ethical Principles

integrity, objectivity, professional competence due care, Confidentiality and professional behaviour

ACCA Rulebook contains the full text of these principles. ACCA emphasise legal compliance in different jurisdictions as well as compliance with ACCA fundamental principles for all its students, affiliates and members as it notes in the module, “as a human being, you and your ethics are shaped by your upbringing and your experience. As a professional accountant or student accountant, you are bound by the laws of your country, and all regulations that flow out of them. As an ACCA member, student, or affiliate, you are also bound by the fundamental principles of ACCA.” ACCA Professional Ethics Module.

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Development of the accountant‘s dilemma

Based on the MJT methodology. Related to accountant`s work life. Two validation studies with ACCA students

– MJT and Accountant dilemma (AJE) 1st. Part (June, 2007); N = 320 2nd. Part (Sept. 2008); N =200 Online survey (worldwide)

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Moral Judgement Test C-score

C-score Valid N Mean St. Dev.

MJT 318 16,8 13,9

Workers 318 29,9 21,9

Doctors 318 27,7 23,6

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Moral judgement competence along the years of study

MJT C-score by educational level (exam level)

Current effect: F(3, 277)=,15483, p=,92652Effective hypothesis decomposition

Vertical bars denote 0,95 confidence intervals

1/2 2 2/3 3

EXAM_LEVEL

0

5

10

15

20

25

30

35

40

MJT

C-s

core

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Moral Judgment competence and age

Current effect: F(2, 315)=3,1129, p=,04584Effective hypothesis decomposition

Vertical bars denote 0,95 confidence intervals

<29 >28<40 >39

Age_groups

0

5

10

15

20

25

30

35

40

MJT

C-s

core

Moral judgement competence by age groups

N = 318; age (mean) = 33,4.

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MJT C-score by working experience

Moral judgment competence by working experience

Current effect: F(2, 315)=9,4942, p=,00010Effective hypothesis decomposition

Vertical bars denote 0,95 confidence intervals

< 5 years > 4 and <16 years > 15 years

Working experience

0

5

10

15

20

25

30

35

40

MJT

C-s

core

Working experience or age alone are not responsible for fostering moral judgment competence.

Statistically significant inverse correlation between years of working experience and levels of moral judgment competence.

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Accounting Dilemma

As a professional accountant, Jane faces a difficult situation. She has found out that her highly regarded manager, who had always supported her and has consistently acted with integrity, has been involved in suspicious activity. Jane discovered that he had created a series of small fictitious payables accounts within the purchase ledger, all of which remain wholly unsettled. She knows that she ought to report any irregularities. Yet, this could lead to the dismissal of her manager, ending a very promising accounting career. When checking the accounts again, she discovers that the ‘fictitious’ accounts have suddenly disappeared. After thinking it over, she decides to keep all this information to herself.

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Accoutant’s Dilemma (cont.)

Students are then asked to choose the level of agreement or disagreement with Jane’s decisions on a 7 point scale with -3 as Strongly Disagree to 3 as Strongly Agree.

Students are then presented 6 arguments each Pro and Contra and are asked to choose on a 8 point scale to indicate whether each argument is accepted or rejected.

As a complement to the AJE, students are then asked to give their opinion about the nature of the problem: legal, personal, economic, ethical or political

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Accounting Judgement Exercise

The accountant dilemma did not fulfil the validation criteria.

However, ACCA chose to use AJE in their module because the main objective of AJE as part of Ethics Module was to sensitize students to moral dilemmas faced in accounting context.

Ethics Module as it appears to students:

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Analysis of AJE responses

Responses to AJE from 200 students are analysed

Students’ agreement or disagreement with Jane.

– participants showed little sympathy with the decision of the actor in the dilemma-story (Jane). This might indicate that they do not conceive the story as a dilemma at all. Actually, more than 80% of the respondents said they disagree with Jane

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Accountant´s dilemma (AJT)Opinion on how the dilemma was solved

I strongly disagree

I strongly agree

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Legal or personal dilemma?

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Political or ethical dilemma?

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Analysis of qualitative responses

Out of 200 students whose AJE responses were analysed, 133 provided feedback on the question: What have you learned from this module?

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Analysis of qualitative responses

A preliminary analysis of these responses shows that following few themes are recognised by the students:– Integration of ethics across curriculum– Ethics goes beyond laws and reinforces ‘public

interest’ role for accountant– Many factors influence ethical behaviour (age,

gender, country)– Ethics can be taught, framework for dealing with

dilemma. Do they expect ready answers?

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1.Hierarchical preference order for the Kohlbergian stages

MJT (Moral Judgement Test)Preference order for the Kohlbergian stages

(ACCA 1st. Study)

SUST1 SUST2 SUST3 SUST4 SUST5 SUST6-6

-5

-4

-3

-2

-1

0

1

2

3

Me

an

Accountant's dilemmaPreference order for the Kohlbergian stages

(ACCA 1st. Study)

SUACST1SUACST2

SUACST3SUACST4

SUACST5SUACST6

-4

-3

-2

-1

0

1

2

Me

an

Accountant's dilemmaPreference order for the Kohlbergian stages

(ACCA 2nd. Study)

SUACST1SUACST2

SUACST3SUACST4

SUACST5SUACST6

-2,0

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

Me

an

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2. Affective-cognitive parallelism

MJTCorrelation between moral judgment competence and stages of moral orientation

(ACCA 1st Study)

SUST1 SUST2 SUST3 SUST4 SUST5 SUST6

Stages of moral orientation (Kohlberg)

-0,5

-0,4

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

0,5

Co

rre

latio

n w

ith

C-s

co

re (

MJT

)

Accountant's dilemma 1Correlation between moral judgment competence and stages of moral orientation

(ACCA 1st Study)

SUACST1SUACST2

SUACST3SUACST4

SUACST5SUACST6

Stages of moral orientation (Kohlberg)

-0,4

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

0,5

Co

rre

latio

n w

ith

C-s

co

re (

AJT

)

Accountant's dilemma 2Correlation between moral judgment competence and stages of moral orientation

(ACCA 2nd. Study)

SUACST1SUACST2

SUACST3SUACST4

SUACST5SUACST6

Stages of moral orientation (Kohlberg)

-0,4

-0,3

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

0,5

Co

rre

latio

n w

ith

AJT

C-s

co

re

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3.Quasi-simplex structure

Moral Judgment Test (MJT)Factor loadings of the six moral orientations.

Principled component analysis, varimax rotation (quasi-simplex structure)(ACCA 1st. Study)

ST1

ST2

ST3

ST4

ST5ST6

-0,1 0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0

Factor 1

-0,1

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

Fa

cto

r 2

Accountants' dilemma 1Factor loadings of the six moral orientations.

Principled component analysis, varimax rotation (quasi-simplex structure)(ACCA 1st Study)

ACST1ACST2

ACST3

ACST4

ACST5

ACST6

0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9

Factor 1

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

Fa

cto

r 2

Accountants' dilemma 2Factor loadings of the six moral orientations.

Principled component analysis, varimax rotation (quasi-simplex structure)(ACCA 2nd. Study)

Rotation: Varimax normalizedExtraction: Principal components

ST1

ST2

ST3

ST4

ST5

ST6

0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9

Factor 1

-0,2

-0,1

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

Fa

cto

r 2

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Conclusion

The analysis of responses to AJE shows that students prefer stage 4 andreject other higher or lower stages.

However, nearly 80% of students showing disagreement with Jane’s decision suggests that AJE does not seem to generate the moral conflict as would be expected from other MJT studies.

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Conclusion

Literature review (not presented here) shows that there is growing need to bring ethical dilemmas into the accounting and business educational programmes

Global association of accounting bodies IFAC, has formally required all its affiliate bodies to ensure ethics is taught and assessed in their qualifications

Given the nature and scale of ACCA qualification ACCA needed to find a practical and effective way of integrating ethics in its qualification.

Initial response from the students to Ethics Module and Professional Accountant papers suggest that students appreciate this opportunity to engage with moral dilemmas in non-threatening academic setting provided by ACCA exams and assessment.

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How to become Chartered Accountant through ACCA

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ACCA Accounting Qualification: An Overview of Professional Educational Framework

ACCA Awarding

Body

Design Syllabus

Conduct ExamQuality Control

Online Ethics Module

Student:Writes exam

Professional ExperienceEthics Module

Tuition Providers:Prepare students for exams

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Professional Accountant Paper