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Book part
Publication date: 23 August 2014

Andrea R. Drake, Linda J. Matuszewski and Fabienne Miller

There has been a call for additional managerial accounting research that examines the effect of non-pecuniary preferences (such as those for honesty and fairness) on…

Abstract

Purpose

There has been a call for additional managerial accounting research that examines the effect of non-pecuniary preferences (such as those for honesty and fairness) on managerial reporting decisions.

Methodology/approach

Drawing from trait theory, agency theory, and psychological contracts theory, Kidder (2005) suggests that personality traits and perceived unfairness in the workplace both help predict detrimental workplace behaviors, with perceived fairness affecting the honesty in reporting of some individuals but not others. We test Kidder’s (2005) theory in an experimental setting where participants have opportunity and incentive to report dishonestly.

Findings

Participants’ honesty preferences and ethical values (idealism and relativism) were measured, and the fairness of the participants’ employment contracts was manipulated. As predicted, higher preferences for honesty are significantly associated with honesty in reporting, suggesting that participants make trade-offs between increasing their own wealth and acting honestly. Additionally, the perceived fairness of compensation interacted with honesty preferences and relativism to affect honesty in reporting.

Practical and social implications

The implication for practice is that while a small number of employees are likely to consistently behave in honest or self-interested ways, firms may be able to positively influence the behavior of the majority of employees by enacting policies and procedures that contribute to perceptions that compensation is fair.

Originality/value of paper

These findings contribute to our understanding of non-pecuniary preferences on managerial reporting decisions.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-1-78190-842-6

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Article
Publication date: 3 June 2019

Janet R. Jones, Amy Foshee Holmes, Mary Fischer and Brooklyn Cole

The purpose of this paper is to investigate how trust, honesty and transparency impact the willingness and timeliness of communicating financial information between…

Abstract

Purpose

The purpose of this paper is to investigate how trust, honesty and transparency impact the willingness and timeliness of communicating financial information between Government Finance Officers (GFOs) and members of the municipal boards they serve.

Design/methodology/approach

Survey data was collected from professionals who work with municipalities to ensure government resources are properly managed. Nonparametric local-linear regression was used to analyze the data.

Findings

Evidence suggests that trust in the board, GFO preference for honesty and greater transparency of the municipality influence the timeliness of communication. There is evidence that when the GFO and board members have a working relationship built on trust and the GFO has a preference for honesty, the GFO is more willing to share positive information with the board. In addition, there is evidence that with greater transparency and trust in the board, there is a reduction in the time of sharing positive information in situations where there is little discretion in disclosing and less willingness to share information.

Research limitations/implications

A principal limitation of this study is the small sample size. In addition, the study was conducted using only participants from the pool of members of the Government Finance Officers Association of Texas. As an exploratory study, the survey included a minimal number of questions to gather data from actual GFOs and included only six possible scenarios. The time constraint resulted in a reduced number of questions related to the models used. Other limitations include the potential of missing variables, factors or perceptions related to scenarios not presented in the survey instrument.

Practical implications

The findings suggest that with greater transparency, there is less time between the event and the GFO communication to the board providing the opportunity to improve the effectiveness of the decision-making process.

Originality/value

This study is the first to explore the effects of increased transparency on the level of communication between the GFO and the board.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 31 no. 2
Type: Research Article
ISSN: 1096-3367

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Book part
Publication date: 8 August 2014

Michael Paz, Bernhard E. Reichert and Alex Woods

We examine the effect of peer honesty on focal manager honesty in a budget reporting setting. We disclose peer honesty to the focal manager at three levels: no, partial…

Abstract

We examine the effect of peer honesty on focal manager honesty in a budget reporting setting. We disclose peer honesty to the focal manager at three levels: no, partial, and full disclosure of the reporting behavior of the other managers in the focal managers’ cohort. In partial disclosure, only the reports of the least honest peers are disclosed to the focal manager. In full disclosure, all managers’ reports in the cohort are disclosed to the focal manager. We predict and find that disclosure of other managers’ reports leads to less honesty compared to the absence of disclosure. We show that disclosure changes the focal manager’s perceptions of what constitutes acceptable reporting behavior, such that reporting more dishonestly becomes more acceptable. Our results have implications for understanding fraud dynamics and have practical implications for the design of control systems, as they suggest that managers will use peer dishonesty to justify their own dishonesty, even when they know that only some of their peers report dishonestly.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-78190-838-9

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Book part
Publication date: 27 October 2016

Brian K. Laird and Charles D. Bailey

Traditional agency theory assumes monitoring is good for the principal, but we investigate an unintended effect: diminishment of the agent’s preference for honesty. We…

Abstract

Traditional agency theory assumes monitoring is good for the principal, but we investigate an unintended effect: diminishment of the agent’s preference for honesty. We hypothesize greater dishonest behavior in a monitored environment than in a non-monitored environment, when the agent has the opportunity to cheat outside the scope of monitoring. Relevant theories to explain such behavior are behavioral agency theory, where trust and reciprocity are thought to alter contractual outcomes, and the fraud-triangle theory, where the ability to rationalize deviant acts affects behavior. We utilize participants who have been acclimated to either a monitored or an unmonitored condition in an immediately preceding experiment and seamlessly continue that treatment. Within each of these conditions, participants perform a simple task with a performance-based monetary reward. Half self-report and can safely cheat, while the other half are verified; the difference between verified and self-reported scores is a proxy for dishonest reporting. As hypothesized, unmonitored individuals reciprocate with honest behavior, while monitored individuals tend toward dishonest behavior when the opportunity arises. Implications for fraud prevention are discussed.

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-78560-973-2

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Book part
Publication date: 16 July 2019

Charles Bailey, Nicholas Fessler and Brian Laird

The authors investigate the joint effects of two environmental variables, performance-based pay (PBP) and performance monitoring (PM), on behavioral dishonesty in a…

Abstract

The authors investigate the joint effects of two environmental variables, performance-based pay (PBP) and performance monitoring (PM), on behavioral dishonesty in a setting where the controls subsequently are absent. In a laboratory study using 88 participants in a 2×2 experimental design, simulating a work environment, the authors manipulate the presence of PBP and PM. Once the participants are accustomed to their assigned work environment and have completed contractual tasks unrelated to the dishonesty experiment, the authors allow them to privately roll dice to determine the size of a bonus gift card. Dishonesty levels are inferred from differences between treatment groups in the prizes claimed. The authors find an interaction effect, where inferred dishonesty in the performance-based-pay group is higher than the fixed-pay group when there is no PM, but lower when there is PM. Although theory and existing literature did not lead us to hypothesize these exact results, they offer important insights into a complex relationship. By jointly examining the effects of worker contracts and workplace monitoring on dishonesty, this research extends the understanding of the potential consequences of formal controls. As the workplace grows more complex, employers increasingly rely on information provided by frontline employees and managers. Thus, unintended effects of managerial controls on honesty are an important topic in the business literature.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-1-78973-278-8

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Book part
Publication date: 20 January 2021

Vincent K. Chong, Michele K. C. Leong and David R. Woodliff

This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create…

Abstract

This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create budgetary slack. The results suggest that budgetary slack is (lowest) highest when accountability pressure is (present) absent under a private information situation. The results further reveal that accountability pressure is positively associated with subordinates' perceived levels of honesty, which in turn is negatively associated with budgetary slack creation. The findings of this paper have important theoretical and practical implications for budgetary control systems design.

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Book part
Publication date: 3 May 2018

M. Christian Mastilak, Linda Matuszewski, Fabienne Miller and Alexander Woods

Commentators have claimed that business schools encourage unethical behavior by using economic theory as a basis for education. We examine claims that exposure to agency…

Abstract

Commentators have claimed that business schools encourage unethical behavior by using economic theory as a basis for education. We examine claims that exposure to agency theory acts as a self-fulfilling prophecy, reducing ethical behavior among business students. We experimentally test whether economics coursework or a manipulated competitive vs. cooperative frame affects measured ethical behavior in simulated decision settings. We measure ethical behavior using established tasks. We also measure ethical recognition to test whether agency theory reduces recognition of ethical issues. Exposure to agency theory in either prior classwork or the experiment increased wealth-increasing unethical behavior. We found no effect on unethical behavior that does not affect wealth. We found no effect of exposure to agency theory on ethical recognition. Usual laboratory experiment limitations apply. Future research can examine why agency theory reduces ethical behavior. Educators ought to consider unintended consequences of the language and assumptions of theories that underlie education. Students may assume descriptions of how people behave as prescriptions for how people ought to behave. This study contributes to the literature on economic education and ethics. We found no prior experimental studies of the effect of economics education on ethical behavior.

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-78754-973-9

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Article
Publication date: 10 June 2019

Kemi Salawu Anazodo, Rose Ricciardelli and Christopher Chan

The purpose of this paper is to explore the social stigmatization of the formerly incarcerated identity and how this affects employment post-release. The authors consider…

Abstract

Purpose

The purpose of this paper is to explore the social stigmatization of the formerly incarcerated identity and how this affects employment post-release. The authors consider the characteristics of this identity and the identity management strategies that individuals draw from as they navigate employment.

Design/methodology/approach

The authors conducted semi-structured interviews with 22 men at various stages of release from federal institutions in Canada. Participants were actively searching for employment, intending to or would consider searching for employment, or had searched for employment in the past post-incarceration. Participant data were simultaneously collected, coded and analyzed using an inductive approach (Gioia et al., 2012).

Findings

Formerly incarcerated individuals have a unique awareness of the social stigmatization associated with their criminal record and incarceration history. They are tasked with an intentional choice to disclose or conceal that identity throughout the employment process. Six identity management strategies emerged from their accounts: conditional disclosure, deflection, identity substitution, defying expectations, withdrawal and avoidance strategies. More specifically, distinct implications of criminal record and incarceration history on disclosure decisions were evident. Based on participants’ accounts of their reintegration experiences, four aspects that may inform disclosure decisions include: opportune timing, interpersonal dynamics, criminal history and work ethic.

Originality/value

The authors explore the formerly incarcerated identity as a socially stigmatized identity and consider how individuals manage this identity within the employment context. The authors identify incarceration history and criminal record as having distinct impacts on experiences of stigma and identity management strategic choice, thus representing the experience of a “double stigma”.

Details

Equality, Diversity and Inclusion: An International Journal, vol. 38 no. 5
Type: Research Article
ISSN: 2040-7149

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Article
Publication date: 27 September 2011

Guangyou Liu

The purpose of this paper is to test whether significant differences in ethical reasoning exist between Chinese accountants and managers when facing an ethical dilemma…

Abstract

Purpose

The purpose of this paper is to test whether significant differences in ethical reasoning exist between Chinese accountants and managers when facing an ethical dilemma. Further tests are conducted to identify what professional contextual factors and personal value preferences can be introduced to explain the ethical reasoning differences observed.

Design/methodology/approach

Three research questions are raised and related hypotheses are developed and tested by the use of a defined issue test (DIT) instrument containing four hypothetical scenarios of different dilemmatic issues, and a Rokeach values survey questionnaire adapted to suit the Chinese business culture.

Findings

The findings and conclusions include: Chinese managers and accountants are not significantly differentiated in terms of ethical reasoning levels measured by the overall DIT instrument, however, the break‐down results of the DIT individual dilemmatic scenarios shows that significant differences exist between the two professional types in three out of four scenarios. Second, gender and frequency of making compromises are two significant contextual determinant of ethical reasoning levels of managers but not those of accountants, and for the accountants, no significant contextual factors are observed in the current study. Third, in determining the impacts of value preferences on ethical reasoning levels, the four‐factor classification approach produces a more contrasting result than the seven‐factor classification approach.

Research limitations/implications

The selection of the four scenarios in the DIT instrument is subjective according to the designation of the test, and Chinese business profession's ethical ideologies might differ among different regions. However, these research limitations might inspire further ethics research on cross‐regional comparisons in China and other emerging economies.

Practical implications

In Chinese surging markets, appropriate socio‐economic order can only be maintained by highly ethical reasoning and conduct on the part of business managers and accountants. The current results and findings would help to identify what factors and value preferences weigh more, in order to improve the professional ethicality.

Originality/value

This paper contributes to the research literature of business ethics by adding a managers‐accountants comparative study on ethical reasoning differences, especially the ethicality of two different professions in emerging economies; further, it includes contextual factors and value preferences in identifying those determinants of ethical reasoning differences.

Details

Asia-Pacific Journal of Business Administration, vol. 3 no. 2
Type: Research Article
ISSN: 1757-4323

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Book part
Publication date: 26 June 2013

Abstract

Details

Advances in Management Accounting
Type: Book
ISBN: 978-1-78190-842-6

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