The Moral Reasoning of Public Accountants in the Development of a Code of Ethics: The Case of Indonesia

By Gaffikin, M. J. R.; Lindawati, A. S. L. | Australasian Accounting Business & Finance Journal, March 1, 2012 | Go to article overview

The Moral Reasoning of Public Accountants in the Development of a Code of Ethics: The Case of Indonesia


Gaffikin, M. J. R., Lindawati, A. S. L., Australasian Accounting Business & Finance Journal


Abstract

The objective of this study is to explore the user's perceptions of the role of moral reasoning in influencing the implementation of codes of ethics as standards and guidance for professional audit practice by Indonesian public accountants. The study focuses on two important aspects of influence: (i) the key factors influencing professional public accountants in implementing a code of ethics as a standard for audit practice, and (ii) the key activities performed by public accountants as moral agents for establishing awareness of professional values. Two theoretical approaches/models are used as guides for exploring the influence of moral reasoning of public accountants: first, Kolhberg's model of moral development (Kolhberg 1982) and, secondly, the American Institute of Certified Public Accountants (AICPA)'s Code of Conduct, especially the five principles of the code of ethics (1992, 2004). The study employs a multiple case study model to analyse the data collected from interviewing 15 financial managers of different company categories (as users). The findings indicate that (i) moral development is an important component in influencing the moral reasoning of the individual public accountants, (ii) the degree of professionalism of public accountants is determined by the degree of the development of their moral reasoning, and (iii) moral reasoning of individuals influences both Indonesian public accountants and company financial managers in building and improving the effectiveness of the implementation of codes of conduct. It is concluded that the role of moral reasoning is an important influence on achieving ethical awareness in public accountants and financial managers. The development of a full code of ethics and an effective compliance monitoring system is essential for Indonesia if it is to play a role in the emerging global economy.

Key words: Moral development, role of moral reasoning, institutional ethics, codes of ethics, Indonesia's public accountants; globalisation.

JEL Classification: M41, M42, M48.

Introduction

As the world has moved inexorably towards the global economy it has become obvious that there exist many national differences which, if left unchanged, may inhibit progress towards a shared universal awareness. The accounting profession has long realised this and has for some time been striving for the international harmonisation of accounting practices notably through the development of international accounting standards such as International Financial Reporting Standards (IFRS). However, business practices are far from universal and there are many infrastructural differences between individual states that have arisen from different cultural, political and social contexts as well as stages of economic development. There needs to be an effective reconciliation of these differences if global consistency is to be achieved. One example, in respect to the harmonisation of accounting practices, is that accountants must have fairly common perceptions as to their functions. Therefore, it is desirable that there be some commonly accepted standards of behaviour; that is, acceptable behaviour in respect of fulfilling their responsibilities to their clients, their profession and their society in general, a large part of which is generally referred to as their standards of professional ethics.

Differences in the levels of economic development or business sophistication have resulted in some nations seeming to lag in the development of effective ethical codes of practice which would serve as the benchmark for acceptable professional conduct. Thus, despite recent concerns resulting from the spectacular financial disaster at the beginning of this century such as interest in the "Enron effect" or the implications of the WorldCom debacle (and the resultant changes in accounting regulation), the accounting profession in the USA has long had codes of professional ethics with which its members are required to comply. …

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