Academic journal article Academy of Educational Leadership Journal

Accounting Student Perceptions of Ethical Behavior: Insight into Future Accounting Professionals

Academic journal article Academy of Educational Leadership Journal

Accounting Student Perceptions of Ethical Behavior: Insight into Future Accounting Professionals

Article excerpt


Governmental and organizational directives often mandate ethical behavior. Much of the research into ethics relies on whether the participant believes a situation is ethical or not. This study extends ethics research by examining accounting students' perceptions of ethical situations on a continuous scale. Our results suggest that an individual's perception may be influenced by his or her position in the scenario or by his or her gender. We find that perception of ethical behavior is affected by the threat of consequences. These findings can be used to improve ethics training in both organizations and business schools.


The Public Accounting Reform and Investor Protection Act of 2002, better known as the Sarbanes-Oxley (SOX) Act, was developed in response to corporate scandals such as those involving Enron, Tyco International, and WorldCom. WorldCom's earnings management techniques overstated income by hiding bad debt, understating expenses, and backdating contracts. Tyco International executives sold company stock without proper reporting to the United States Securities and Exchange Commission (SEC), gave unapproved bonuses to buy silence within the organization, and gave themselves interest-free or low interest loans for personal use. Enron executives made false statements to banks and auditors and participated in insider trading, bribery, irregular accounting practices, bank fraud, securities fraud, wire fraud, money laundering, and conspiracy. These three scandals ended in bankruptcy and caused significant financial loss to employees and investors.

The United States Congress responded to the scandals bypassing SOX, which has effectively changed the business environment in which both accountants and business managers operate. The Sarbanes-Oxley Act attempts to regulate and reinforce ethical behavior within companies in the United States. Corporate chief executive officers and chief financial officers must attest to the accuracy of the company's financial statements. Corporations cannot make personal loans to executives or directors, and top-level management must attest that the company has effective internal controls in place to prevent or detect misstatements and improprieties.

Section 404 of the Sarbanes-Oxley Act (H.R. 3763) requires that an organization's external auditor assess the internal controls and issue an opinion on the management's report regarding internal controls over financial reporting. The 1992 report of the Committee of Sponsoring Organizations of the Treadway Commission (Committee of Sponsoring Organizations of the Treadway Commission, 1994), The Internal Control- Integrated Framework, is the standard used by auditors and managers to evaluate controls. The report outlines the key components of a good internal control structure. The first component is the organization's control environment. The framework outlines that the control environment sets the tone of an organization and influences the control consciousness of its people. The control environment includes the integrity, ethical values and competencies of the entity's people, management's philosophy and operating style, the process used by management to assign authority and responsibility and to organize and develop its people; and the attention and direction provided by the board of directors. An ethical corporate governance system requires an ethical, underlying internal control structure.

External auditors and managers are expected to evaluate whether an organization sufficiently incorporates ethics into the control environment. If they recognize an action is unethical but at the same time perceive the action is commonly accepted or less unethical than another, couldn't this affect the evaluation of risk? This study is part of an ongoing effort to identify factors that influence future managers' and accountants' opinions relating to what is ethically acceptable and unacceptable. This study extends prior research by using a continuous scale instead of the typical dichotomous scale (Kreie & Cronan, 1998; McMahon & Harvey, 2005). …

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