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    An Examination of How Entry-Level Staff Auditors Respond to...
    research summary posted July 15, 2015 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 04.02 Impact of Fees on Decisions by Auditors & Management, 04.04 Moral Development and Individual Ethics Decisions, 04.09 Individual & Team Conduct - e.g., premature signoff, underreporting hours 
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    Title:
    An Examination of How Entry-Level Staff Auditors Respond to Tone at the Top vis-a`-vis Tone at the Bottom.
    Practical Implications:

    These findings add to the understanding of how accountants respond to ethical tones at all levels within their organization and provide important evidence that the tone at the bottom is a key determinant, more so than tone at the top, of the ethical decision making of staff auditors. This study provides important insights into how ethical tone at multiple levels of an organization impacts entry-level employees’ ethical decision making. By recognizing the important role that immediate supervisors play in influencing their subordinates, organizations can more effectively promote an ethical culture at all levels of the organization and not simply at the top.

    Citation:

    Pickerd, J. S., Summers, S. L., & Wood, D. A. 2015. An Examination of How Entry-Level Staff Auditors Respond to Tone at the Top vis-a`-vis Tone at the BottomBehavioral Research in Accounting 27 (1): 79-98.

    Keywords:
    accountability, auditing, control environment, tone at the top, underreporting
    Purpose of the Study:

    The purpose of this study is to examine how entry-level staff auditors make decisions in the presence of sometimes conflicting ethical tones set by their supervising senior (tone at the bottom) and partner (tone at the top).

    The authors employ self-concept maintenance theory, which argues that unethical behavior becomes acceptable to the degree the action can be rationalized, is used to motivate this study. The low ethical tone of supervisors at the top and/or bottom may cause entry level staff auditors to construe unethical situations as devoid of ethical implications, such that entry level staff auditors may act more unethically if either (or both) of their supervisors exhibit a low ethical tone. Further, in-group bias theory, which suggests that individuals will be more influenced by close in-group members who are similar to them than by out-group members who are dissimilar to them, is used to predict that entry-level staff auditors will follow the tone set by their senior more than the tone set by a partner. This study also examines how individuals perceive their own ethical decisions under such conditions.

    Design/Method/ Approach:

    A 2x2 between-subjects experiment is administered to 114 graduate accounting students from a private university. 70 percent of participants had performed an internship and 72 percent had signed with an employer. Participants are told they went over budget on the number of hours they spent auditing cash and must decide how many to report. Ethical tone is manipulated using the tone from both the engagement senior and engagement partner. The evidence was gathered prior to September 2014.

    Findings:
    • The findings indicate that tone at the top and tone at the bottom interact, such that if either the partner and/or the senior exhibit low tone, then participants are more likely to misreport the number of hours they worked on the engagement.  
    • Participants are more influenced by the tone set by their supervising senior than that of their engagement partner. This suggests to the authors that tone at the bottom is a critical determinant of the ethical decision making of entry-level staff auditors.  
    • Tone significantly affects whether participants interpret the decision to underreport as an ethical dilemma. 
    • When both a partner and a senior exhibit high tone, participants are significantly more likely to interpret their decision on whether to underreport hours as an ethical dilemma than in the other conditions. This result suggests that poor tone causes individuals to cease considering the ethical implications of their decisions, thus allowing them to maintain a high self-concept when they violate organizational standards.
    Category:
    Independence & Ethics
    Sub-category:
    Impact of Fees on Decisions by Auditors & Management, Individual & team conduct (e.g. premature signoff - underreporting hours), Moral Development and Individual Ethics Decisions