ABSTRACT: Accounting ethics instruction, like accounting ethics research, has been strongly influenced by the work of Kohlberg and his stages of ethical development. The Defining Issues Test (DIT), which is based on Kohlberg's theory, has been extensively used to assess level of ethical development of both accounting students and accounting practitioners. Theory suggests that the relationship between p-score on the Defining Issues Test (DIT) and behavior should be linear, i.e., ethical behavior should increase monotonically with level of ethical development. However, Ponemon's (1993a) paper reported a quadratic relationship, meaning that subjects with low scores and those with high scores are more likely to behave unethically. This study replicates Ponemon's (1993a) study. Unobtrusive observation of actual behavior in a laboratory experiment is used to record behavior, which is then related to p-score on the DIT. The results confirm Ponemon's (1993a) finding of a quadratic relationship. However, in this study , the results appear to be driven by the behavior of male subjects; female subjects show a monotonically decreasing level of ethical behavior as p-score on the DIT increases.
Ethics instruction has increasingly become an established component of accounting education. Concerns about the level of unethical behavior in practice served as the impetus for the integration of ethics instruction into accounting courses (McNair and Milam 1993; Fulmer and Cargile 1987). Initially, accounting educators may have been reluctant to broaden coverage of ethics for a variety of reasons, including lack of space in an already heavy curriculum, lack of appropriate instructional materials (McNair and Milam 1993), and faculty perceptions that no reward accrues to those who institute such an innovation (Cohen and Pant 1989). More recently, ethics instruction has come to be regarded as a necessary part of the socialization of accounting students into the profession (see, for example, Clikeman and Henning 2000).
Accounting ethics research has participated in this change in accounting education by providing tools to assess both the current level of ethical development  of accounting students (for example, Jeffrey 1993; St. Pierre et al. 1990) and the effect of adding ethics to the curriculum (for example, Armstrong 1993). Since the major paradigm in accounting ethics research is based on Kohlberg's theory of ethical development and the major tool for research has been Rest's Defining Issues Test (DIT), which is based on Kohlberg's theory, accounting ethics education has also tended to be viewed through this lens. Thus, successful efforts to integrate ethics into accounting education may typically be assessed with reference to increases in the level of ethical development displayed by the students as measured by the DIT.
Many studies based on the DIT have made the implicit assumption that any relationship between the score on the DIT and behavior would be a linear one. However, in 1993, Ponemon found a "heretofore unknown, nonlinear association" between subjects' ethical development, as measured by the Defining Issues Test (DIT), and ethical behavior (in this case, choice to "free-ride" in an experiment). The results show a quadratic relationship, with subjects at the lower and the higher stages of ethical development more likely than those in the middle to engage in unethical behavior. Ponemon (1993a) called for more investigation before strong conclusions could be reached about the relationship of ethical development and economic choice behavior.
The original goal of accounting ethics education was to set the stage for a change in ethical behavior (Loeb 1988), and thus to initiate improvements in the perceived unethical environment in accounting practice. Achievement of this goal, given the current emphasis on increasing the level of ethical development of the students, requires that increased ethical development result in increased ethical behavior. …