Accountants and Their Conduct:
Implications of Behavioral Ethics
December 5, 2013
Robert Prentice
Robert.Prentice@mccombs.utexas.edu
Let’s start with a little survey…
A quick quiz:
Question #1:
I have solid, well-considered ethical beliefs
that can be changed only by reasoned
arguments or new evidence.
___True
___ False
Question #2:
I have character and integrity that will carry me
through difficult situations and hard choices.
___ True
___ False
Good News: You’re not as unethical as you
could be…
How many of you stole candy from a baby this
week?
How many of you took an opportunity to mug a
little old lady?
Bad News: You are not as ethical as you think
you are.
We are all Lance Armstrong…sort of.
Humility
The McGurk Effect
Optical Illusions
There are even tactile illusions…
A quick quiz:
Question #1:
I have solid, well-considered ethical beliefs
that can be changed only by reasoned
arguments or new evidence.
___True
___ False
A quick quiz:
Question #1:
I have solid, well-considered ethical beliefs
that can be changed only by reasoned
arguments or new evidence.
___True
_X_ False
Question #2:
I have character and integrity that will carry me
through difficult situations and hard choices.
___ True
___ False
Question #2:
I have character and integrity that will carry me
through difficult situations and hard choices.
___ True
_X_ False
If there is one overwhelming finding in
behavioral ethics research over the past
decade, it is this:
If there is one overwhelming finding in
behavioral ethics research over the past
decade, it is this:
 Most people (including accountants) want to
and do think of themselves as good people
 80% or so of people believe themselves to be
more moral than their peers
 92% of Americans are satisfied with their
moral character
 A higher percentage of people believe they
themselves will get into heaven than that
Mother Theresa did.
 Most people (including accountants) want to
and do think of themselves as good people
 Most people (including accountants)
frequently act unethically, usually in minor
ways
 Most people want to and do think of
themselves as good people
 Most people frequently act unethically,
usually in minor ways
 Our accomplice:
Moral Beliefs and Attitudes:
10---9---8---7---6---5---4---3---2---1
Very
Very UnEthical
ethical
Moral Beliefs and Attitudes:
1) Self-Interest
Your views on the morality of homosexual
conduct might well change if your son comes
out of the closet….
“Rob Portman Supports Same-Sex Marriage
After Learning Son Is Gay”
Senator Rob Portman, (R)-Ohio
Your views on the morality of premarital
sex might change if your teenage daughter
got pregnant…
2) Emotional Reaction
2) Emotional Reaction
Disgust
10---9---8---7---6---5---4---3---2---1
Very
Ethical
Very
Unethical
Frank is on a footbridge over the trolley tracks. He knows trolleys and can
see that the one approaching the bridge is out of control, with its
conductor passed out. On the track under the bridge, there are five
people; the banks are so steep that they will not be able to get off the
track in time. Frank knows that the only way to stop an out-of-control
trolley is to drop a very heavy weight into its path. But the only
available, sufficiently heavy weight is a large person also watching the
trolley from the footbridge. Frank can save the five by shoving the large
person onto the track in the path of the trolley, resulting in his death; or
he can refrain from doing this, letting the five die. Is it morally
permissible for Frank to push the large person onto the tracks?
Bottom Line: Our moral views are not as fixed
as we think.
Moral Actions
Most of us (including accountants) believe
that we have rock solid character that leads
us to act morally….
Most people (including accountants) are largely
unaware of factors that cause good people to
do bad things:




Cognitive errors
Social pressures
Organizational pressures
Other environmental factors
Fundamental Attribution Error:
 Underweight situational factors in others
 Overweight them in ourselves
Let’s Talk About Some of those Factors
1) Transparency
“Integrity is living your values
even when no one is looking.”
1) Transparency
1) Transparency
1) Transparency
1) Transparency
2) The Self-Serving Bias
a. Affects how we collect, process, and even
remember information.
i. Collect
“The speeches I drafted … were composed of facts
filtered from the stacks of reports and intelligence
that daily hit my desk. As I read these reports, facts
and judgments that contradicted the British version
of events would almost literally fade into
nothingness. Facts that reinforced our narrative
would stand out to me almost as if highlighted, to
be later deployed by me, my ambassador and my
ministers like hand grenades in the diplomatic
trench warfare.”
ii. Process
i. Football game
ii. Capital punishment
iii. Remember
b. People respond to incentives, even if
unconsciously.
i. The more at stake; the more we respond.
 Earning Management
b. People respond to incentives, even if
unconsciously.
i. The more at stake; the more we respond.
ii. David Duncan & Enron
c. We are often unaware of how we are
impacted.
i. Doctors & Drug Companies
Affects others: 61%
Affects me: 16%
d. Numerous studies show that accountants
are affected by the self-serving bias, like
everyone else, but they also tend not to
believe it:
i. In 2000, a top AICPA official testified before
the SEC, saying:
“We are professionals that practice by the
highest moral standards. We would never be
influenced by our own personal financial well
being.”
ii. “Ethical decisions are biased by a stubborn view of oneself as
moral, competent, and deserving, and thus, not susceptible
to conflicts of interest. … An ethical blind spot emerges as
decision makers … assume that conflicts of interest are
nonissues.” [Chugh et al.]
Dolly Chugh,
NYU
3) Obedience to Authority
3. Obedience to Authority
a. Milgram study
3) Obedience to Authority
a. Milgram study
b. Auditors Who Know What Boss Wants
4) Conformity Bias
4) Conformity Bias
a. Asch Study
Solomon Asch
4) Conformity Bias
a. Asch Study
b. Betty Vinson of WorldCom
4) Conformity Bias
a. Asch Study
b. Betty Vinson of WorldCom
c. KPMG: “You’re either on the team or
off the team”
5) Role Morality
Consider:
ABC Drug Company’s most profitable drug, its
internal studies indicate, causes 14-22
“unnecessary” deaths a year. Competitors
offer a safe medication with the same
benefits at the same price. If regulators
knew of the internal study, they would ban
sale of the drug.
Individual morality: 97% condemn
When asked to assume the role of directors of
ABC, 100% of 57 groups said that ABC should
continue to sell.
5) Incrementalism.
a. The slippery slope
b. Abu Ghraib
“But after four or five nights of running the M.I.
block of the Abu Ghraib hard site, Davis said,
“I just wanted to go home.” He felt that
what he did and saw there was wrong. “But
it was reaffirmed and reassured through the
leadership: We’re at war. This is Military
Intelligence. This is what they do. And it’s
just a job,” he said. “So, over time, you
become numb to it, and it’s nothing. It just
became the norm. You see it—that sucks. It
sucks to be him. And that’s it. You move on.”
“In the beginning,” [Sabrina Harman] said, “you
see somebody naked and you see underwear
on their head an you’re like, ‘Oh, that’s
pretty bad—I can’t believe I just saw that.’
and then you go to bed and you come back
the next day and you see something worse.
Well, it seems like the day before wasn’t so
bad.”
c. Enron CAO Rick Causey, a UT graduate,
needed to do a deal to disguise a delay
in recording losses. An executive
balked.
Causey: “Is it possible the deal is still alive?”
Exec: “No.”
Causey: “So there’s no chance of it coming
back?”
Exec: “No”
Causey: “Is there even a little bit of a chance of
it coming back?”
Finally, the exec took the hint and the deal was
declared “undead”.
The exec later said:
“You did it once, it smelled bad. You did it
again, it didn’t smell bad.”
Re-cap:
It’s hard for us to believe that we could screw
up the way infamous white collar criminals
have done, because we feel we are good
people.
But they felt they were good people, too.
Other factors:
6) Framing
7) Loss Aversion
8)Tangible & Abstract
Free ethics video series brought to you by
McCombs:
http://ethicsunwrapped.utexas.edu/
Cara Biasucci,
Film Maker
DeSteno & Valdesolo: “Morality, contrary to
popular belief, can’t be controlled simply by
strength of will and reason.”
Implications for IESBA:
1) Codes of Professional Conduct are a Good
Idea for Several Reasons:
1) Codes of Conduct are a Good Idea for
Several Reasons:
a. Their existence and required training can
help keep ethics in accountants’ frame of
reference:
i) Cheating Study
ii) Expense Report Study
b. They typically reduce conflicts of interest.
i) Important because accountants tend not
to believe they are susceptible, just like
everyone else
c. They help hold people accountable.
i) Haidt says: “…the most important
principle for designing an ethical society is to
make sure that everyone’s reputation is on
the line all the time, so that bad behavior
will always bring bad consequences.”
Jon Haidt
NYU
The End.
Thanks for your time.