Accountfug, Organfzations and Sockty, Vol. 21, No. 1. PP. 41-51, 1996 Copyright0 1995 ElsevierScience Ltd
Printed in Great Britain.AUrights reserved.
AUDITORS’ BEHAVIOUR IN AN AUDIT CONFLICT SITUATION: A RESEARCH NOTE ON THE ROLE OF LOCUS OF CONTROL AND ETHICAL REASONING*
JUDY S. L. TSUI
City University of Hong Kong
of Hong Kong
This study investigates the interaction effects of locus of control, a personality variable, and ethical reasoning on the behaviour of auditors in an audit conflict situation. Eighty experienced auditors from a sample of Big Six and Non-Big Six CPA firms in Hong Kong were provided with a case study involving an audit conflict situation and were asked to state the extent to which they would accede to the client’s request. Subjects were also administered Rotter’s Locus of Control Scale and the Defining Issues Test (DITJ to measure ethical reasoning. Analyses of the data using multiple regression found that ethical reasoning moderated the relationship between locus of control and the auditors’ responses to accede to client’s request in an audit contlict situation. An implication of these results is that the explicit recognition of both locus of control and ethical reasoning provides a better explanation for differences in auditors’ ethical decision making
The issue of ethical behaviour of accountants
has recently been a source of much concern
and research interest (Cohen et al., 1993). A
discernable strand of thls research interest
attempts to unravel and evaluate the factors
that could affect ethical behaviour of accountants (Shaub, 1989; Ponemon, 1990; Ponemon & Gabhart, 1993). These studies emphasized
the notion that the cognitive processes of individuals should not be treated as a “black box”, but should be explicitly recognized since these
processes are expected to affect individuals’
ethical decision making (Ponemon,
1992a; 1992b; Ponemon & Gabhart, 1990).
More specifically, these studies “incorporate
or expressly consider a psychological framework for the ethical reasoning process” in order to answer the question what makes
more or less ethical? (Jones &
Ponemon, 1993, p. 411).
The psychological framework for ethical reasoning which is based on Kohlberg’s (1969) Theory of Cognitive Moral Development uses
the Defining Issues Test (Rest, 1979) to measure an individual’s level of ethical reasoning. Using the P scores, ’ individuals are classified
The authors would like to acknowledge the comments of Mark Young and Chee Chow, two anonymous reviewers and the editor. The research instruments used in this study are available from the authors. l
1 The P score measures the relative importance of stages five and six of ethical reasoning. Ponemon (1992b, suggests that “the higher P score implies a lower percentage of stages 1 through 4.” 41
J. S. L. TSUI and F. A. GUL
into different levels of ethical reasoning. Based
on this theory, several studies have found sup
port for the notion that the levels of ethical
reasoning are related to auditors’ professional
1990; 1992a; 1992b;
Ponemon & Gabhart, 1990; Tsui, 1994). For
example, Ponemon (1992b) found that those
auditors with lower levels of ethical reasoning
tended to underreport their chargeable time
more severely than those with higher levels
of ethical reasoning.
Unfortunately, consideration of the cognitive
process by way of the ethical reasoning process, by itself, is an inadequate characterization of the “black box” since it fails to recognize the role of other “individual” differences, such as personality which may be defined as individuals’ attitudes and beliefs
(Pratt, 1980; Gul, 1984). Trevino (1986, p.
602) recognized this and argued that:
the individual’s cognitive moral development stage
determines how an...
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