An empirical examination of the determinants of auditors' ethical sensitivity



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Texas Tech University


The ethics of certified public accountants (CPAs) operating in a very competitive professional environment are under increasing scrutiny by the federal government. Firms are criticized for perceived conflicts of interest arising from providing a multiplicity of services in addition to audit services. However, the accounting profession has attempted to respond to public criticism through a revision of the AICPA Code of Professional Conduct in 1988. This new code is intended to be more proactive in dealing with ethical problems than past codes. Ethics education and other approaches are being suggested to affect auditors' handling of professional ethical situations.

The purpose of this study was to evaluate the effects of auditors' individual ethical orientations, professional commitment, and organizational commitment on their ability to recognize the ethical issues in a professional situation and on their level of cognitive moral development. Other objectives of the research were: (a) to develop a measure of auditors' ethical sensitivity; (b) to measure auditors' ethical orientation, ethical sensitivity, and the level of cognitive moral development reflected in their ethical judgments; (c) to examine the relationships of various demographic variables to ethical sensitivity and level of cognitive moral development; and (d) to evaluate the effects of ethical orientation on auditors' professional and organizational commitment.

Based on ethical theory developed by Hunt and Vitell [1986], a research model was constructed that hypothesized professional commitment and ethical orientation as exogenous predictor variables of organizational commitment and ethical sensitivity. Ethical sensitivity was in turn h3rpothesized to affect level of cognitive moral development. The covariance structural equations modeling technique LISREL [Joreskog and Sorbom, 1985] was used to provide a best fit model estimating the relationships among the variables and the quality of the measurements.

The variables were measured using a questionnaire that was administered to a sample of 207 auditors at all levels of a single Big Eight public accounting firm in a southwestern state. The auditors varied widely in their ethical orientations, ethical sensitivity, and level of cognitive moral development. The results of the study supported the significant effects of an auditor's ethical orientation on professional commitment, which in turn affected organizational commitment. The results represented in the best fit model did not, however, support the hypothesis that these three variables affect an auditor's ability to recognize ethical situations in a professional context. Ethical sensitivity was positively related to age, but not to education (including ethics education). The level of cognitive moral development reflected in ethical judgments was higher for females and for auditors who had taken a college ethics course.

The findings suggest that an auditor's ethical orientation upon entering the firm affects the level of commitment that person feels toward the accounting profession and ultimately toward the firm. However, none of these three factors can be expected to affect ethical sensitivity. College ethics courses may increase auditors' level of cognitive moral development but will not necessarily aid them in detecting ethical issues in a professional context. This study's results suggest the need for public accounting firms to place a greater emphasis on ethical sensitivity in public accounting continuing education courses as well as to evaluate auditors' ethical orientations.



Auditors -- Professional ethics