Self-Interest vs. Concern for Others: What's the Impact on Management Accountants' Ethical Decisions?

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Accounting cover-ups, fraud, and downright illegal practices keep grabbing the headlines. Much of the negative attention focused on the accounting profession has centered on evidence that some auditors and accountants have been willing to compromise ethical and professional standards to accomplish personal or corporate goals.

Perhaps less discussed in the popular press has been management accountants' role in permitting or facilitating some frauds as well as the critical role that management accountants will play in undertaking the necessary reforms to calm the financial markets regarding the reliability of financial statements. Management accountants have been directly implicated in such frauds as WorldCom and HealthSouth, leading to guilty pleas and pledges of cooperation with authorities. Of course, this isn't to say that management accountants routinely involve themselves in dishonest behavior. Yet they're clearly part of the problem facing the accounting profession--and will be part of the solution.

As a response to the scandals, the Sarbanes-Oxley Act holds all parties involved in producing and approving financial statements more accountable, so CEOs and CFOs must now provide explicit assurance regarding both the financial statements and the company's internal controls. And auditors of public companies must now provide opinions on management's representations regarding both financial disclosures and internal controls in addition to ensuring that their clients extensively document controls. To strengthen their independence, these same auditors are now restricted from providing a variety of consulting services to their audit clients.

A STUDY OF ETHICS

Because of the attention that the recent financial scandals have brought to the accounting profession, it's important to understand what factors contribute to management accountants' willingness to engage in behaviors that clearly cross the line of professional ethical standards. An earlier study we did with MBA students revealed a surprisingly strong willingness to engage in brazen accounting and financial behaviors. These findings led us to study management accountants and factors that might influence their willingness to engage in questionable behaviors.

In performing such research, it wasn't our purpose to "catch" anybody doing anything wrong or to try to identify the percentage of management accountants willing to participate in unethical behavior. We sought the answers to two basic questions: First, does a management accountant's motivated self-interest (greed) affect his/her willingness to endorse questionable behavior? And, second, does a management accountant's concern for others mitigate that willingness? We also wanted to see if the answers were different depending on whether management accountants themselves realized the benefits or whether they only improved the appearance of the financial statements. Basically, how do people's important life views shape their ethical reasoning in facing situations that are clearly unethical?

To find out, we used a survey that we developed and refined in the earlier study using MBA students from three universities. Thanks to the IMA, we were able to email a large percentage of its membership and within the e-mail provide a link to our online …