ISSUES IN ACCOUNTING EDUCATION American Accounting Association Vol. 27, No. 2 DOI: 10.2308/iace-50119 2012 pp. 399–418

Ethics and Accounting Education

Stuart Thomas

ABSTRACT: The current study investigates how a university accounting education affects the rationales used by accounting and first-year business students in making

ethical decisions, the level of deliberative reasoning they employ, and their ethical

decisions. Senior accounting students (with approximately four accounting courses to

complete) were found to exhibit higher deliberative reasoning, make more frequent use

of post-conventional modes of deliberative reasoning, and make more ethical decisions

than first-year accounting students. These results suggest that a university accounting

education has a positive effect on deliberative reasoning, on the use of post-conventional

modes of deliberative reasoning, and on ethical decisions. There was no difference

between the level of deliberative reasoning and ethical decisions of first-year accounting

and first-year business students, but there were differences in their modes of deliberative

reasoning. These results suggest that first-year accounting and first-year business

students may make ethical decisions differently, implying the need for a different

emphasis when teaching ethics to these two groups of students.

Keywords: deliberative reasoning; modes of deliberative reasoning; ethical decisions; university accounting education.

INTRODUCTION

E ducation has been suggested as a means by which ethics may be improved in the

accounting profession. The American Accounting Association, Committee on the Future

Structure, Content, and Scope of Accounting Education (AAA 1986 ) has stated that the

introduction of ethical standards is one of the purposes of accounting education, and this has found

widespread support (e.g., Stark et al. 1986). The transference of ethical standards has been

described as essential to the socialization of students into the accounting profession (Clikeman and

Henning 2000). Warth (2000, 69) even claims that the vast majority of accounting firms ‘‘rely

primarily on colleges to cover the ethics and ethical behavior expected of the profession,’’ rather

than providing ethics training themselves.

Research indicates that a university education has a positive effect on accounting students’

ethical standards (Keller et al. 2007), their cognitive moral capability (e.g., Armstrong 1987, 1993;

Armstrong and Mintz 1989; Bernardi 1995; Cohen and Pant 1989; Jones et al. 2003; Ponemon

1993; Ponemon and Glazer 1990; St. Pierre et al. 1990), and their prescriptive reasoning (e.g.,

Dellaportas et al. 2006 and Welton et al. 1994). The current study reexamines the effect of a

Stuart Thomas is an Associate Professor at the University of Lethbridge.

Published Online: January 2012

399

university education on ethical decisions in an accounting context by investigating its effect on

deliberative reasoning rather than cognitive moral capability or prescriptive reasoning. Cognitive

moral capability ( prescriptive reasoning) is the level of ethical reasoning an individual is capable of

in general contexts (in a particular context). Deliberative reasoning, however, is the actual level of

ethical reasoning an individual is utilizing in a particular context (Rest 1979). This is important,

since research indicates that accounting students may not use their full moral capability when facing

ethical accounting dilemmas and have higher prescriptive reasoning scores than deliberative

reasoning scores (Thorne 2001). The current study is the first to examine how the modes of

deliberative reasoning utilized by accounting students are affected by an accounting university

education and how this ultimately affects ethical decisions. Understanding these issues will allow

accounting educators to better understand possible deficiencies in the ethical decision making of

accounting students beginning their accounting education as well as those who are on the verge of

completing theirs and, hence, provide some direction in terms of what needs to be emphasized in

order to improve students’ ethical decision making.

University accounting educators are typically charged with teaching at least two accounting

courses to non-accounting business students. Treating them the same as accounting students may

negatively impact the effectiveness of the ethics education they receive if the ethical decision

making of these two groups of students differs. In fact, a disproportionately high level of accounting

students and practicing accountants has a sensing/thinking cognitive style that is associated with

low levels of ethical reasoning (e.g., students: Geary and Rooney 1993; Fisher and Ott 1996; and

practicing accountants: Vaassen et al. 1993; Schloemer and Schloemer 1997; Abdolmohammadi et

al. 2003). Studies indicate that accounting students have the same or higher cognitive moral

capability, the degree to which an individual may potentially incorporate higher order principles

into his/her ethical reasoning (Thorne 2001), than other business students (Icerman et al. 1991;

Jeffrey 1993). The current study again compares the ethical reasoning of first-year accounting and

first-year business students. The study compares deliberative reasoning rather than cognitive moral

capability because, as discussed above, this may be a more relevant measure of ethical decision

making.

COGNITIVE MORAL CAPABILITY AND DELIBERATIVE REASONING

Most ethical research in accounting has assessed ethical reasoning using Rest’s (1979)

Defining Issues Test (e.g., Lampe and Finn 1992). The Defining Issues Test (DIT) calculates an

individual’s p-score, a measure of cognitive moral capability. Higher cognitive moral capability has

been linked to better ethical decision choices in practicing accountants (Ponemon 1992), accounting

students (Abdolmohammadi and Baker 2007), university students (West et al. 2004), and

individuals generally (Blasi 1980). Empirical results, however, have been mixed (see Blasi 1980;

Rest 1986 for reviews). Statistically significant relationships have been found in about two-thirds of

the studies reviewed in Rest (1986 ), and the size of the correlation has been modest. Cognitive

moral capability explains 10–15 percent of the variation in ethical behavior (Thoma 1994).

Issues have been raised about the relevance of using cognitive moral capability as a measure of

ethical reasoning (e.g., Thorne et al. 2003). Thorne (2000, 2001) argues that while cognitive moral

capability measures the level of principled ethical considerations of which an individual is capable,

it does not describe the actual level of principled ethical considerations an individual applies in

resolving an ethical issue. Empirical results suggest, for example, that cooperative accounting

students do not use their full cognitive moral capability when making accounting-specific ethical

decisions (Thorne 2000, 2001). Cognitive moral capability is also measured in a context-free setting

as opposed to, say, an accounting setting. This is an issue since it is widely held that context plays a

major role in ethical decisions (e.g., Shaub 1994; Arnold 1997; Rest et al. 1999).

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Issues in Accounting Education Volume 27, No. 2, 2012

The current study assesses deliberative reasoning, ‘‘the formulation of an intention to act on a

particular moral (ethical) dilemma’’ (Thorne 2001, 106 ). Rest et al. (1999) posit that individuals are

more likely to use more principled ethical reasoning to resolve context-free ethical issues than

issues they face in everyday life. In support of this, Thorne (2001) found that accounting students’

cognitive moral capacity was significantly greater than their deliberative reasoning. Consequently,

Earley and Kelly (2004) suggest that it would be interesting to examine potential differences

between the results obtained using the DIT measure of cognitive moral capacity and accounting

specific measures such as Thorne’s (2000, 2001) measure of deliberative reasoning.

MODES OF DELIBERATIVE REASONING

A multidimensional ethics scale (MES) has been used in a number of studies (e.g., Flory et al.

1992; Cohen et al. 1993, 1996, 2001) to measure the use of different modes of reasoning in

resolving ethical issues. The MES assumes that individuals can use one or more rationales in

making ethical decisions and that the reliance on these rationales may vary with the decision

context. Moral equity, contractualism, relativism, utilitarianism, and egoism are five rationales of

ethical reasoning from the moral philosophy literature that have been identified (Reidenbach and

Robin 1988). Moral equity posits that decisions should be evaluated in terms of their inherent

fairness, justice, goodness, and rightness. With contractualism, decisions are based on the implied

responsibilities individuals have toward each other. Relativism proposes that ethical decisions

depend on their context; there are no universal rules. Utilitarianism asserts that decisions should be

based on the outcome; the goal being to maximize benefits and minimize costs. Like utilitarianism,

egoism is focused on benefits and cost, but with egoism, the focus is on the individual decision

maker rather than society (Reidenbach and Robin 1990).

Previous studies using the MES approach have used general business (e.g., Cohen et al. 1992,

1996; Reidenbach and Robin 1990), management accounting (e.g., Flory et al. 1992), and auditing

contexts (Ge and Thomas 2008). Empirical results indicate that auditors were most aware that

actions were culturally/traditionally unacceptable (relativism) and least aware that they violated

rules and unspoken promises (contractualism). Auditors and business students relied on moral

equity, contractualism, and utilitarianism but not relativism when assessing the morality of most of

the actions taken. Auditors relied primarily on these same three factors when determining if they

would perform the act (Cohen et al. 1996, 2001).

COGNITIVE MORAL DEVELOPMENT AND MODES OF DELIBERATIVE REASONING

Research indicates that the five modes of deliberative reasoning used by decision makers are

affected by their level of deliberative reasoning (Ge and Thomas 2008). The five modes of

deliberative reasoning have been placed into three levels described by Kohlberg’s (1969, 1976 )

Cognitive Moral Development (CMD) Theory. At the pre-conventional level, decisions are based

on the benefits the decision maker will experience as a result of the decision. This is consistent with

the egoism approach identified by Reidenbach and Robin (1988). At the conventional level, the

focus is on the expectations of significant others. This is consistent with relativism, another of the

five modes of ethical reasoning. With relativism, ethical rules are not universal; they are

context-dependent. At the post-conventional moral development level, individuals apply universal

ethical principles when making ethical decisions. This is consistent with the other three modes of

reasoning identified by Reidenbach and Robin (1988). At this level, individuals consider universal

fairness (moral equity), the good of society (utilitarianism), and personally held principles

(contractualism) when making ethical decisions.

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HYPOTHESIS DEVELOPMENT

Empirical results suggest that a university education has a positive effect on the cognitive

moral capability of accounting students (e.g., Armstrong 1987, 1993; Armstrong and Mintz 1989;

Bernardi 1995; Cohen and Pant 1989; Ponemon 1993; Ponemon and Glazer 1990; St. Pierre et

al.1990). Although research indicates that accounting students do not use their full cognitive moral

capability when facing accounting-specific ethical dilemmas, it has been found to be positively

correlated with deliberative reasoning (Thorne 2001). It is, therefore, expected that a university

education will have a positive effect on deliberative reasoning. The first hypothesis is, therefore, as

follows:

H1: Senior accounting students use higher deliberative reasoning than first-year accounting students.

Students choosing accounting have a cognitive style associated with low levels of ethical

reasoning (e.g., Geary and Rooney 1993; Fisher and Ott 1996; Abdolmohammadi et al. 2003).

However, research indicates that first-year accounting students have a higher moral capability than

first-year business students (Jeffrey 1993). The current study, therefore, revisits this issue, this time

examining deliberative reasoning, the level of principled ethical considerations actually applied to

resolve ethical dilemmas, instead of cognitive moral capability or prescriptive reasoning, the level

of principled ethical consideration an individual is capable of using (Thorne 2001). The second

hypothesis is, therefore, stated in the null form as follows:

H2: There is no difference between the level of deliberative reasoning of first-year accounting and first-year business students.

Since the five modes of deliberative reasoning used by decision makers are affected by their

level of deliberative reasoning (Ge and Thomas 2008) and senior accounting students are

hypothesized to have higher deliberative reasoning than first-year accounting students (H1), it

follows that senior accounting students will make more frequent use of higher modes of deliberative

reasoning. On the other hand, it is unclear whether first-year accounting students have higher

deliberative reasoning than first-year business students, so no predictions can be made regarding

their use of different modes of deliberative reasoning. The next two hypotheses are, therefore, as

follows:

H3a: Senior accounting students make more use of post-conventional modes of deliberative reasoning than first-year accounting students.

H3b: There is no difference in the use of post-conventional modes of deliberative reasoning between first-year accounting and first-year business students.

Cognitive moral capability is the highest level of principled ethical consideration of which an

individual is capable and has been linked to more ethical decisions (e.g., Abdolmohammadi and

Baker 2007). Research indicates that higher deliberative reasoning leads to more ethical decision

choices (Ge and Thomas 2008). Since senior accounting students are expected to use higher

deliberative reasoning than first-year accounting students, they are further hypothesized to make

more ethical decisions. Also, since it is hypothesized that there will be no difference between the

deliberative reasoning of first-year accounting and business students, it is further hypothesized that

there will be no difference in the number of ethical decisions they make. The remaining hypotheses

are, therefore, as follows:

H4a: Senior accounting students make more ethical decisions than first-year accounting students.

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H4b: There is no difference in the ethical decisions of first-year accounting students compared with first-year business students.

RESEARCH METHODOLOGY

Subjects

Subjects consisted of 70 senior accounting students with approximately four accounting

courses to complete, 42 first-year accounting students, and 106 first-year business students at a

western Canadian liberal education university. Their average ages were 24 years, 21 years, and 21

years, respectively, with age ranges 20 to 36, 18 to 35, and 18 to 37, respectively. Of the senior

accounting students, first-year accounting students, and first-year business students, 36 percent, 50

percent, and 44 percent, respectively, were female. Participation was anonymous and voluntary.

Instrument

The current study combined Thorne’s (2000) accounting-specific defining issues test (DIT)

instrument based on Rest’s (1979) instrument and the MES approach. Subjects responded to four

scenarios, each involving an ethical auditing dilemma, as they believed the person in the case would

respond. Response choices were either that the unethical action would be taken, would not be taken,

or that the subject could not decide. In making the decision, different issues needed to be

considered. Subjects ranked the importance of each issue, on a scale ranging from 1 (Great) to 4

(No). They then ranked the four issues of greatest importance for making the decision. According to

their rankings, the individual’s level of deliberative reasoning was determined by calculating a p-

score, ranging from 0 to 95, determined from the ranking that the individual assigned to post-

conventional items of consideration in resolving an ethical dilemma (Thorne 2000). Other studies

have also employed Thorne’s (2000) instrument to test the ethical reasoning of accounting

professionals (e.g., Thorne et al. 2003) and accounting students (e.g., Ge and Thomas 2008;

Bernardi et al. 2002).

The MES scale was used in previous accounting studies (e.g., Ge and Thomas 2008; Cohen et

al. 1998, 2001). The procedure followed was the one that was used in the Ge and Thomas (2008)

study. For each of the four scenarios, subjects were asked to assess the action according to the five

MES factors comprised of 13 items: three each for moral equity, utilitarianism, and relativism; and

two each for contractualism and egoism, using a seven-point Likert-type scale. The items for moral

equity, for example, had end points ‘‘fair/unfair,’’ ‘‘just/unjust,’’ and ‘‘morally right/not morally

right.’’ Item scores were averaged for the moral equity, contractualism, and relativism factors. The

Cronbach’s alpha measure for these items exceeded the 0.70 score recommended by Nunnally

(1978). When the Cronbach’s alpha measure was low, through trial and error, the item combination

with the highest alpha score would be used. The Cronbach alphas for egoism and utilitarianism

were less than 0.60, regardless of the item combinations, so the item deemed best to represent the

factor was chosen. For egoism, for example, it was believed that the item ‘‘personally beneficial/not

personally beneficial’’ was a superior measure to the item ‘‘in the best interest of the audit firm/not

in the best interest of the audit firm.’’ For utilitarianism, the item ‘‘minimizes benefits while

maximizes harm/maximizes benefits while minimizes harm’’ was chosen. Table 1 reports reliability

measures (Cronbach’s alphas) for each of the scales. These measures were comparable with the Ge

and Thomas (2008) study, which had alphas ranging from 0.814 to 0.892, 0.870 to 0.903, and 0.689

to 0.820 for moral equity, contractualism, and relativism, respectively. This study also used one

item each for egoism and utilitarianism because of low alpha values. The alpha scores of the present

study were also comparable to those of the Cohen et al. (1998, 255) study. The Cohen et al. (2001)

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study did not give detailed alpha scores, but the reported scores appear comparable (Cohen et al.

2001, 6).

RESULTS

Table 2 presents the ages, working hours per week, number of years of work experience, and

grade point averages of the subjects. While there were significant differences, these factors were not

correlated to deliberative reasoning (Table 3). An analysis of variance indicated no relationship

between deliberative reasoning ( p-scores) and gender. Table 4 presents the results of an analysis of

variance and multiple comparison tests of the deliberative reasoning of first-year accounting,

first-year business, and senior accounting students. Since empirical results suggest that a university

education has a positive effect on cognitive moral capacity (e.g., Armstrong 1987, 1993; Armstrong

and Mintz 1989; Bernardi 1995; Cohen and Pant 1989; Ponemon 1993; Ponemon and Glazer 1990;

St. Pierre et al. 1990), and cognitive moral capacity is positively correlated to deliberative reasoning

(Thorne 2001), it was hypothesized (H1) that senior accounting students would have higher

deliberative reasoning than first-year accounting students. Table 4 presents results in support of H1.

TABLE 1

Reliability Measures (Cronbach’s Alphas) for each of the Multi-Dimensional Ethics Scale (MES) Items

Cases

1 2 3 4

Moral Equity 0.954 0.934 0.874 0.940

Contractualism 0.923 0.942 0.958 0.865

Relativism 0.729 0.765 0.760 0.724

Utilitarianism and egoism were measured using one scale.

TABLE 2

Descriptive Information

Means (S.D.)

p-value

First-Year Senior

Accounting Students (n ¼ 42)

Business Students

(n ¼ 106)

Accounting Students (n ¼ 70)

Age 20.57 21.63 24.26 0.000

(3.62) (5.84) (3.38)

Working hours per week 9.62 7.75 16.36 0.001

(10.53) (10.10) (14.69)

Number of years of work experience 1.89 2.12 2.87 0.123

(0.43) (0.26 ) (0.34)

Grade Point Average (GPA) 3.15 3.01 3.19 0.056

(0.41) (0.49) (0.41)

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TABLE 3

Pearson’s Correlations among Selected Items for Subjects

Age Work 1

Week 2

GPA p-score

Age 1

Work1 0.688** 1 Week2 0.374** 0.460** 1 GPA 0.019 �0.050 0.018 1 p-score 0.080 0.086 0.057 0.142 1

** Correlation is significant at the 0.01 level (two-tailed). Work1 ¼ Number of years of work experience. Week2 ¼ Working hours per week.

TABLE 4

Deliberative Reasoning Scores

Panel A: The Deliberative Reasoning ( p-scores) of First-Year Accounting, Business, and Senior Accounting Students

Subject Mean Std. Deviation

First Yr. Bus. Students 0.28537 0.151840

First Yr. Acc. Students 0.27640 0.165389

Senior Acc. Students 0.33893 0.134773

Total 0.30084 0.150997

Panel B: Tests of Between-Subjects Effects

Source Type III Sum of Squares df Mean Square F Sig.

Corrected Model 0.152 2 0.076 3.407 0.035

Intercept 17.069 1 17.069 765.228 0.000

Subject 0.152 2 0.076 3.407 0.035

Error 4.796 215 0.022

Total 24.678 218

Corrected Total 4.948 217

Panel C: LSD (Least Significant Difference) Multiple Comparisons of p-scores

(I) Subject (J) Subject Mean Difference

(I � J) Std. Error Sig.

First Yr. Acc. Students First Yr. Bus. Students �0.00898 0.027231 0.742 Senior Acc. Students �0.06253* 0.029150 0.033

Senior Acc. Students First Yr. Bus. Students 0.05356* 0.023002 0.021

First Yr. Acc. Students 0.06253* 0.029150 0.033

* The mean difference is significant at the 0.05 level.

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The p-scores of senior accounting students were found to be higher than that of first-year

accounting students.

Past research has indicated that first-year accounting students have higher cognitive moral

capacity than first-year business students (Jeffrey 1993). However, research has also suggested that

accounting students have a cognitive style associated with low levels of ethical reasoning (e.g.,

Geary and Rooney 1993; Fisher and Ott 1996). H2 was, therefore, posited in the null form, that

there would be no difference between the deliberative reasoning of first-year accounting and

first-year business students. The results supported this hypothesis.

Given that senior accounting students are expected to have higher deliberative reasoning than

first-year accounting students (H1), H3a proposed that senior accounting students would make

more use of post-conventional modes of deliberative reasoning than first-year accounting students.

Table 5 presents the results of ordinal logistic regressions of subjects’ decisions on the MES factors

for each of the cases. These results are summarized in Table 6 and provide support for this

hypothesis. In all cases, senior accounting students used post-conventional modes of deliberative

reasoning. In contrast, first-year accounting students used post-conventional modes of deliberative

reasoning in only one of the cases (Case 3). H3b proposed that there would be no difference in the

use of post-conventional modes of deliberative reasoning between first-year accounting and

first-year business students. Both used post-conventional modes in Case 3, however, business

students also used post-conventional modes in Case 4. First-year accounting students did not use

post-conventional modes in any other case (Tables 5 and 6). The hypothesis was, therefore, not

supported. There appears to be a difference in the use of post-conventional modes of deliberative

reasoning between first-year accounting and first-year business students.

H4a predicted that senior accounting students would make more ethical decisions than

first-year accounting students. Table 6 summarizes the decisions made in each case by subjects.

Significantly more senior accounting students made ethical decisions than unethical ones in three of

the four cases. In no case did significantly more senior accounting students make unethical

decisions than ethical ones ( p , 0.05, Table 7, Panel A and Table 8). Significantly more first-year

accounting students made ethical decisions than unethical ones in only two of the four cases.

Furthermore, significantly more first-year accounting students made unethical decisions than ethical

ones in one of the four cases ( p , 0.05, Table 7, Panel B and Table 8). This latter result was

repeated for first-year business students. Significantly more first-year business students made ethical

decisions than unethical ones in only two of the four cases. Also, significantly more first-year

business students made unethical decisions than ethical ones in one of the four cases ( p , 0.05,

Table 7, Panel C and Table 9). The percentage of senior accounting students making ethical

decisions was greater than the percentage of first-year accounting students making ethical decisions

for each of the four cases. This difference was statistically significant for Cases 1 and 2 ( p , 0.05,

Table 8). The percentage of senior accounting students making ethical decisions was also greater

than the percentage of first-year business students making ethical decisions in all four cases. This

difference was statistically significant for all four cases ( p , 0.05, Table 9). These results,

therefore, provided support for H4a.

H4b posited that there would be no difference in the ethical decisions of first-year accounting

students compared with first-year business students. The percentage of first-year accounting

students making ethical decisions was greater than the percentage of first-year business students

making ethical decisions in three of the four cases. This difference, however, was not statistically

significant ( p , 0.05, Table 9). Significantly more first-year accounting students made more ethical

decisions than unethical ones in Cases 3 and 4. Also, significantly more first-year accounting

students made more unethical decisions than ethical ones in Case 2 ( p , 0.05, Table 7, Panel B and

Table 8). These results were the same for first-year business students ( p , 0.05, Table 7, Panel C

and Table 8), thus providing support for H4b.

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TABLE 5

Ordinal Logistic Regressions of Subjects’ Decisions on the MES Factors

Panel A: Case 1—First-Year Business Students

�2 Log Likelihood

Chi- Square df Sig. Estimate

Std. Error Wald df Sig.

95% Confidence Interval

Lower Bound

Upper Bound

Model

Intercept Only 111.274

Final 86.214 25.060 5 0.000

MES Factors

Moral equity �0.405 0.232 3.061 1 0.080 �0.860 0.049 Utilitarianism 0.264 0.196 1.811 1 0.178 �0.121 0.649 Contractualism �0.004 0.182 0.000 1 0.984 �0.360 0.353 Relativism �0.239 0.272 0.773 1 0.379 �0.772 0.294 Egoism �0.398 0.151 6.908 1 0.009 0.101 0.694

Panel B: Case 1—First-Year Accounting Students

�2 Log Likelihood

Chi- Square df Sig. Estimate

Std. Error Wald df Sig.

95% Confidence Interval

Lower Bound

Upper Bound

Model

Intercept Only 49.907

Final 36.373 13.533 5 0.019

MES Factors

Moral equity 0.034 0.342 0.010 1 0.920 �0.636 0.705 Utilitarianism �0.022 0.315 0.005 1 0.943 �0.641 0.596 Contractualism 0.025 0.377 0.004 1 0.947 �0.713 0.763 Relativism 0.202 0.448 0.203 1 0.652 �0.677 1.080 Egoism �0.818 0.295 7.714 1 0.005 0.241 1.396

Panel C: Case 1—Senior Accounting Students

�2 Log Likelihood

Chi- Square df Sig. Estimate

Std. Error Wald df Sig.

95% Confidence Interval

Lower Bound

Upper Bound

Model

Intercept Only 57.169

Final 28.925 28.244 5 0.000

MES Factors

Moral equity �1.052 0.474 4.931 1 0.026 �1.981 �0.124 Utilitarianism 0.487 0.399 1.490 1 0.222 �0.295 1.269 Contractualism 0.027 0.341 0.006 1 0.936 �0.642 0.697 Relativism 0.196 0.520 0.142 1 0.706 �0.823 1.216 Egoism �0.400 0.300 1.780 1 0.182 �0.987 0.187

(continued on next page)

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TABLE 5 (continued)

Panel D: Case 2—First-Year Business Students

�2 Log Likelihood

Chi- Square df Sig. Estimate