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The Impact of Ethical Tools on Aggressiveness in Financial Reporting
Author(s) -
Nagle Brian M.,
Wasieleski David M.,
Rau Stephen
Publication year - 2012
Publication title -
business and society review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.524
H-Index - 21
eISSN - 1467-8594
pISSN - 0045-3609
DOI - 10.1111/j.1467-8594.2012.00415.x
Subject(s) - schema (genetic algorithms) , accounting , affect (linguistics) , depreciation (economics) , ethical code , ethical standards , psychology , reading (process) , public relations , business , political science , economics , engineering ethics , law , profit (economics) , computer science , communication , capital formation , machine learning , financial capital , engineering , microeconomics
The proposed adoption of I nternational F inancial R eporting S tandards ( IFRS ) in the U nited S tates has ignited a debate as to whether the principles‐based nature of these standards better serves the interests of investors. While it is argued that these principled‐based standards will encourage more transparent financial reporting than the current rules‐based U . S . standards, critics argue that IFRS will invite more aggressive financial reporting through the liberal exercising of professional judgment. This empirical study aims to understand what individual and organizational factors may affect aggressiveness when making accounting judgments. In particular, we examine the influence that prior ethics training, codes of ethics and an individual's predominant moral reasoning schema have on adherence to company policy in an accounting‐related (depreciation) judgment. Results of the study show that respondents with prior ethics training are more likely to adhere to company accounting policy than those who have not had formal ethics education. Respondents presented with a company ethics code also were less aggressive in their accounting judgments than those who were not presented with a code prior to reading the scenario. Finally, decision aggressiveness was moderated by individuals who used conventional moral reasoning schemas.