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The Influence of Roles and Organizational Fit on Accounting Professionals’ Perceptions of their Firms’ Ethical Environment

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Abstract

A public accounting firm’s ethical environment has an important role in encouraging ethical behavior, but prior research has shown that firm leaders (e.g., partners) perceive the ethical environment of their firms to be stronger than do non-leaders (Bobek et al. J Bus Ethics 92(4): 637–654, 2010). This study draws on several research streams in management to investigate the reasons behind this discrepancy. Our online questionnaire was completed by 139 accounting professionals. We find that when non-leader accounting professionals believe that they have a meaningful role in shaping and maintaining the ethical environment and/or have strong organizational fit with the accounting firm, they are more likely to perceive the ethical environment as strong and to perceive it similarly to firm leaders. That is, differences in leaders’ and non-leaders’ perceptions of the ethical environment are mediated by non-leaders’ perceptions of their role in participating in shaping and maintaining the ethical environment of their firms. Further, we find that among firm leaders, a stronger public interest orientation (i.e., feeling a responsibility to serve the public interest) and a higher frequency of receiving mentoring are both associated with stronger perceptions of the ethical environment. Overall, our study is one of the first to directly test potential explanations for why firm leaders and non-leaders can have disparate views of a firm’s ethical environment. In addition, these findings provide practical feedback to practitioners on actions they can take to improve perceptions of their firms’ ethical environment.

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Notes

  1. It is important to note that we are studying accounting professionals’ perceptions of their firms’ ethical environment. Treviño et al. (2008, p. 247) address the issue of perceptions versus reality, and point out that it is difficult, if not impossible, to make any assertion about the accuracy of perceptions. Nevertheless, they suggest that gaps in perceptions between groups represent legitimate concerns and thus warrant consideration.

  2. There has been an increase in the past decade in public accounting professionals being promoted to alternative “post-senior manager” positions such as directors and principals (Almer et al. 2011). According to Almer et al. (2011, p. A40), these positions often “comprise a new leadership track”. Thus, we consider partners, directors, and principals to represent firm leadership with senior managers and below representing “non-leadership” positions.

  3. We initially contacted 11 different offices. Seven of these offices agreed to provide participants. The number of participants who replied from the seven offices ranged from 12 to 25, with response rates ranging from 36 to 68 %. We received a total of 154 responses; however, 10 of these participants did not complete the ethical environment scale, and 5 had other missing data points. Our results therefore are based on 139 complete responses.

  4. In order to maximize the use of professional accounting participants, we used an online instrument to collect data for multiple studies. The data for one of the other studies (not related to this study) was collected first and included a 2 × 2 between-subjects design. We perform t tests to insure that there were no significant differences in participants’ responses to this study based on experimental condition. As expected, none were found. Further, as part of the instrument development process, we obtained expert input from nine experienced researchers as well as participants at an accounting behavioral research symposium. We also pilot tested the entire instrument with a group of 62 Executive MBA students. A number of improvements and clarifications were made to the instrument based on this process.

  5. Our leadership group includes 15 partners, 2 principals, and 7 directors.

  6. These percentages do not add to 100 % because a small percentage of participants’ time also was spent on consulting engagements. The majority (70 %) of participants indicated that they spent 90–100 % of their time in audit (48 % of participants) or tax (22 % of participants). In supplemental analyses, we consider whether there are differences between participants who primarily work in audit versus tax by adding a variable that represents the percentage of time participants were assigned to audit engagements. This variable is not significant, indicating that audit and tax professionals view their ethical environments similarly.

  7. Factor analysis with promax rotation reveals that 11 of the 12 items load on one factor (lowest item loading = 0.560). The one item that does not load with the other 12 is “Special recognition is given to individuals who demonstrate ethical behavior within my firm.” When that item is dropped from the factor analysis, the remaining items all load on one factor (lowest item loading = 0.614). All reported results are qualitatively the same if we use an alternative ethical environment scale with only 11 items as the dependent variable.

  8. The three items are: (1) my values seem to fit in well with the values of my firm, (2) my values match those of my co-workers at my level in the firm, and (3) the personality of my firm reflects my own personality. Responses are on a seven-point scale anchored by 1 = strongly disagree and 7 = strongly agree. Thus, the scale range is 3–21.

  9. For example, a partner may have responded N/A to the item measuring social interaction with those “above me in the firm.” In that case, the value of SOCIALIZATION is the average of the responses to the other two items (at “my level in the firm” and “levels below me in the firm”). Of the 139 participants, only 16 selected N/A for one of these three items. Cronbach’s alpha was computed based on the 123 participants who responded to all three items.

  10. Bobek and Radtke’s (2007) participants were tax professionals from primarily (79 %) regional and local firms. Their overall mean rating (using the same 12-items measured on a seven-point scale) was 72.39. This study’s mean of 95.73 converted to a seven-point scale is 74.45, slightly higher (p = 0.001) than that in the Bobek and Radtke (2007) study. However, in the Bobek and Radtke (2007) study, the ratings of participants from international firms (mean of 75.60) were higher than those from local and regional firms (mean of 71.3; Bobek and Radtke 2007, p. 74). Thus, because our participants are primarily from international firms (72.9 %) it appears that the ethical environment perceptions of our participants are quite consistent with the findings of Bobek and Radtke (2007).

  11. Based on Table 3, it appears that the two areas with the most discrepant views between leaders and non-leaders are in the components of (1) mission and values and (2) procedures, rules and codes of ethics. Both of these components are under the control of firm leaders. This is consistent with our conjecture that firm leaders believe that they are creating a stronger ethical environment then what is perceived by non-leaders.

  12. It is not surprising that the construct of organizational fit (in addition to ROLE) mediates the effect of LEADER, as Table 4 shows that ROLE and ORGANIZATIONALFIT are highly correlated with each other (r = 0.586, p < 0.0001).

  13. As an additional sensitivity test, we re-ran our non-leader regressions reported in Table 6, Column 2 with “experience” and “position in the firm” as covariates. When years of experience is included as a covariate it is not significant (p = 0.115); we repeat this same analysis for hierarchical position within the firm and again find that “position” is not significant (p = 0.607). This provides at least indirect evidence that our variables of interest (e.g., organizational fit and role) are not proxying for an experience effect. Finally, as an additional sensitivity test with regard to which positions are included as members of the leadership group, we isolate the senior managers and explore these participants’ means for our study’s primary variables (i.e., ETHICALENVIRONMENT, ORGANIZATIONALFIT, and ROLE) and find that senior managers appear to be similar to other non-leader accounting professionals (as opposed to similar to leaders).

  14. As compared to other types of firm leaders (e.g., principals and directors), partners are owners of the firm, which is a somewhat different role than a typical corporate leader. While the numbers are small (our sample includes 15 partners and 9 principals and directors), we did compare the ethical environment perceptions of the partners (mean of 101.3) to the non-partner leaders (mean of 98.1) and they are not statistically different (p = 0.273). Thus, we do not have any evidence that the leaders who are “owners” (versus non-owners) view the ethical environment differently.

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Acknowledgments

We appreciate the feedback provided by participants at the 2009 Behavioral Tax Symposium, the 2010 and 2012 ABO Research Conference (particularly David Wood, discussant), and the helpful comments on developing the questionnaire from Vicky Arnold, Dann Fisher, Julia Higgs, Brian Hogan, Erin Nickell, Jillian Phillips, Rob Pinsker, Greg Trompeter, and Joe Ugrin. Amy Hageman acknowledges support from a Kansas State University College of Business Administration summer research award for this project.

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Correspondence to Robin R. Radtke.

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Bobek, D.D., Hageman, A.M. & Radtke, R.R. The Influence of Roles and Organizational Fit on Accounting Professionals’ Perceptions of their Firms’ Ethical Environment. J Bus Ethics 126, 125–141 (2015). https://doi.org/10.1007/s10551-013-1996-4

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