Effect of guanxi and ethical orientations on Chinese auditors' ethical reasoning
Abstract
Purpose
The purpose of this study is to investigate the effect of Chinese auditors' personal values (guanxi and ethical orientations) on their ethical reasoning (ethical judgments and behavioral intentions). In addition, this study aims to explore the joint effect of guanxi and ethical orientation on auditors' ethical reasoning.
Design/methodology/approach
This study is based on a field survey of 191 auditors working in Certified Public Accounting (CPA) firms that operate in the People's Republic of China (China).
Findings
The main findings indicate that guanxi and relativism orientations negatively associate with, while idealism orientation positively associates with, auditors' ethical judgments and behavioral intentions. However, when decomposing the overall ethical judgment into three judgment groups, the main effects of guanxi and ethical orientations on auditors' ethical judgments become marginal and those effects fully hold only when using acceptability as criteria to judge questionable behavior in the vignettes. In addition, the results of the joint effect of guanxi and ethical orientations indicate that guanxi orientation weakens both the positive effect of idealism and the negative effect of relativism orientations on auditors' ethical reasoning.
Originality/value
This study contributes the literature by investigating the ethical reasoning of auditors in a country with a relatively weak legal system that relies on guanxi (literally, interpersonal relationships and connections) culture to operate business. Furthermore, this study extends the literature by documenting the moderating effect of guanxi orientation on the relation between auditors' ethical orientation and their ethical reasoning.
Keywords
Acknowledgements
JEL classification – M42The author thanks two anonymous reviewers and Koon-hung Chan, Sally Gunz, Michel Magnan, William Shafer, Robin Snell and Susana Yuen for their help and comments. The author acknowledges the financial support from the Institute of Chartered Accountants of Manitoba and from the University of Manitoba Start-up Research Fund. All errors remain the author's responsibility.
Citation
Liu, M. (2013), "Effect of
Publisher
:Emerald Group Publishing Limited
Copyright © 2013, Emerald Group Publishing Limited