Advances in Accounting, incorporating Advances in International Accounting 25 (2009) 5763

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Advances in Accounting, incorporating Advances in

International Accounting
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The role of affect and tolerance of ambiguity in ethical decision making

Eric Weisbrod
School of Accountancy, W. P. Carey School of Business, Arizona State University, Tempe, Arizona 85283-3606, United States

a r t i c l e

i n f o

Keywords:
Affect
Tolerance of ambiguity
Ambiguity tolerance
Ethics
Moral reasoning
Ethical decision making
Auditing
Accounting
PANAS
DIT
Accounting education

a b s t r a c t
This research note extends the research on ethical decision making in accounting by examining the effect of
two variables, affect and tolerance of ambiguity, on ethics-related decisions made in two contexts: both
personal and organizational settings. I conduct an experimental study among undergraduate accounting
students and nd that tolerance of ambiguity signicantly inuences ethical decisions in both personal and
organizational settings. The results also reveal a signicant interactive effect between negative affect and
tolerance of ambiguity.
2009 Elsevier Ltd. All rights reserved.

An auditing profession whose members exhibit high integrity in the

service of society is foundational to a fair and efcient capital market.
And yet, the urry of recent corporate reporting scandals has called
into question the very ethics of the auditing profession in this country
and world-wide (Armstrong, Ketz, & Owsen, 2003; Massey & Thorne,
2006). In response, the US Congress passed the SarbanesOxley
reforms (SOX), the National Association of State Boards of Accountancy
(NASBA) revised the educational provisions of the Uniform Accountancy Act (mandating ethics education in collegiate accounting
curricula) and the Board of Examiners has revised the content of the
national CPA examination to include ethics.
Ethical decision-making as an area of accounting research is in its
infancy. Signicant research outside of accounting has explored the
development of moral reasoning in various societies, but the relationship between enhanced moral reasoning and enhanced ethical conduct
remains unclear. Recent research has found that personal attributes
(such as tolerance for ambiguity) or environmental conditions (such as
the decision-maker's affective state) can mediate the relationship
between moral reasoning and ethical conduct. Accordingly, additional
research centering on these personal attributes and environmental
conditions would be benecial and is the focus of the research reported
here.
This paper extends the research on ethical decision making by
examining the effect of two variables, affect and tolerance of ambiguity,
on ethics-related decisions made in two contexts: both personal and
organizational settings. I nd that tolerance of ambiguity signicantly

E-mail address: Eric.weisbrod@asu.edu.

0882-6110/$ see front matter 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.adiac.2009.02.011

inuences ethical decisions in both personal and organizational settings.

The results also reveal a signicant interactive effect between negative
affect and tolerance of ambiguity.
This research note is structured as follows: Section 1 motivates the
research and develops hypotheses, Section 2 describes the research
methodology, Section 3 discusses the results of the experiment, and
Section 4 concludes with a discussion of the implications and limitations
of the research.
1. Motivation and hypothesis development
1.1. Ethics in accounting
Accountants and auditors have an obligation to practice with
integrity and objectivity in the interest of public welfare. The recent
spate of corporate accounting scandals has damaged the reputation
of the accounting profession, and calls for improved ethical
decision-making in accounting have been numerous. Armstrong
et al. (2003) observe that the sheer number of accounting abuses
serves as prima facie evidence that something more is needed in
terms of accounting ethics, and also note that calls for teaching
more ethics in accounting education have come from nearly every
source, including the AACSB, AAA, AICPA, AAEC, NCFFR, and IFAC
(Armstrong et al., 2003).
Thorne's (1998) model of ethical decision making may be decomposed into two elements: moral development (the cognitive acts of
recognizing moral issues and thinking them through) and virtue (the
ethical motivation and intention to act morally and the ethical character
to bring that intention to fruition) (Armstrong et al., 2003). Moral
development encompasses what many researchers refer to as moral

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E. Weisbrod / Advances in Accounting, incorporating Advances in International Accounting 25 (2009) 5763

reasoning (or prescriptive, or principled reasoning), while virtue refers

to traits such as courage and fortitude that must be present in order for
an individual to translate moral reasoning into ethical action.
A number of accounting studies have examined moral reasoning in
accounting, usually measured using Rest's (1979) dening issues test
(DIT). Rest takes a cognitive-developmental approach to moral
reasoning by investigating the problem solving strategies and
cognitive structures people use to guide their moral decision making
(Schatzberg, Sevcik, Shapiro, Thorne, & Olusegun Wallace, 2005).
Rest's neo-Kohlbergian framework consists of three moral schemas:
Personal Interest, Maintaining Norms, and Postconventional. As
individuals move from the personal interest level of moral reasoning
to the postconventional level, they move from framing moral
dilemmas in terms of the impact on themselves to framing moral
dilemmas in terms of the impact to society.
Many accounting studies have utilized the DIT to document that
moral reasoning can have a signicant impact on behavior (e.g.
Schatzberg et al., 2005; Ponemon 1992; Ponemon 1993; Ponemon &
Gabhart 1990; Windsor & Ashkanasy 1995; Falk, Lynn, Mestelman, &
Shehata,1999; Kaplan, Newberry, & Reckers,1997; Church, Gaa, Nainar,
& Shehata, 2002). However Schatzberg et al. (2005) note that the
ndings in these prior accounting studies suggest that the impact of
moral reasoning is not always in the predicted direction. For example,
Ponemon (1993) found that auditing students with relatively high
levels of moral reasoning were more, not less, likely to engage in freeriding behavior than auditing students with moderate levels of moral
reasoning (Schatzberg et al., 2005). Schatzberg et al. (2005) extend
prior research by simultaneously studying both moral reasoning and
economic incentives in an experimental auditing environment. They
report once again an inverse relationship between moral development
and ethical action. That is, subjects with lower levels of moral
reasoning report more truthfully than subjects with higher levels of
moral reasoning. The authors conclude that the relation between
economic incentives and moral reasoning is more complex than
previously acknowledged in the accounting literature, (Schatzberg
et al., 2005) and that missing variables may exist.
Unfortunately, extant research has focused almost exclusively on
the moral development aspect of ethical decision making, and ignored
other variables of potential consequence, such as environmental
conditions (e.g., economic incentives) and personal attributes. Only
now are we coming to realize the potential for these other variables to
interact with moral development in inuencing ethical actions. The
failure of past research to control for other variables of importance
may explain the mixed and unpredicted ndings of the prior
literature. This study, which is exploratory in nature, examines two
personal attributes, affect and tolerance of ambiguity, which are
predicted to impact ethical decision making.
1.2. Affect and ethical decision making
A large body of research has examined the role of affect in decision
making. Affect is a construct used to describe moods, and is generally
recognized as having two dimensions, Positive Affect and Negative
Affect (Clark, Tellegen, & Watson, 1988). Clark et al. (1988) note
Although the terms Positive Affect and Negative Affect might suggest
that these two mood/emotion factors are opposites (that is, strongly
negatively correlated), they have in fact emerged as highly distinctive
dimensions that can be meaningfully represented as orthogonal
dimensions in factor analytic studies of affect (Clark et al., 1988).
Positive and negative affect may relate to personal disposition (mood)
or to a reaction to an environmental event (emotion). The former is more
stable (less-transient), the later more transient. Accordingly, researchers
can measure naturally-occurring affect or manipulate experimental
conditions to induce a desired state of affect, although individuals with
different affective dispositions may react differently to environmental
stimuli. Bierstaker and Cianci (2006) experimentally manipulated

conditions to induce desired affective states. Their purpose was to

explore the impact of positive and negative affect on auditor's technical
and ethical judgments. They nd that when auditors were in a negative
affective state, they made less ethical judgments; technical judgments
were unaffected (Bierstaker & Cianci 2006).
There are various potential explanations for these ndings, all highly
speculative at this juncture in the evolution of this research. One
possibility is that individuals who experience negative affect can be
expected to act in a fashion to alleviate the discomfort of that condition.
Sawers (2005), for example, found that many individuals exhibit
negative affect when confronted with a difcult decision task. Predictable coping mechanisms included decision delay and avoidance,
enhanced reliance on the preferences of others or status-quo bias. One
might also analogize a state of negative affect as similar to a loss-frame
and predict greater risk-taking behavior per tenets of prospect theory.
That is, individuals experiencing negative affect would engage in more
risky conduct, such as unethical conduct.
The generalizability of Bierstaker and Cianci's ndings is unknown.
This is especially the case because the states of negative (and positive)
affect in their study were not naturally-occurring. They were induced
by experimental manipulations not necessarily common to an
auditor's environment. I extend their research by examining the
inuence on ethical decision making of naturally occurring states of
affect in my participant pool.
Because past research indicates that positive and negative affect are
separate mood/emotion factors, and that each factor may affect ethical
decision making differently in different situations, I examine the effects of
both positive and negative affect in a number of different ethical dilemmas at both a personal and organizational level, leading to H1 and H2:
H1. Subjects experiencing relatively more negative affect will
make less ethical decisions.
H2. Subjects experiencing relatively more positive affect will
make more ethical decisions.
1.3. Tolerance of ambiguity and ethical decision making
Other recent research has examined the effect of cultural differences
on ethical decision making. For example, Wong-on-Wing and Lui (2007)
examine differences between Chinese and American attributions of
morality. However, 5000 ft-level analyses, such as this, leaves much
unexplained. This is because cultural differences are made up of several
sub-components, which individually or in combination may drive
results (Cohen, Pant, & Sharp, 1993). Specically, Hofstede decomposes
cultural differences into four key attributes: Tolerance for Ambiguity
(uncertainty avoidance), Masculinity/Femininity, Independence/Collectivism, and Short-term/Long-term Focus. Instead of using culture as a
proxy for an individual's personal attributes, I measure personal
attributes directly, and focus on the rst of Hofstede's four attributes,
tolerance of ambiguity (uncertainty avoidance).
Cohen et al. (1993) discuss the ethical implications of differences in
tolerance of ambiguity (TOA). They posit that TOA will affect ethical
decision making in relation to rule orientation, where individuals with
lower TOA will be less willing to break company rules, even when doing
so would be in the company or society's best interest, while individuals
with higher TOA are more willing to tolerate the ambiguity of outcomes
when going beyond the rules (Cohen et al., 1993). Individuals with low
TOA ascribe an aura of truth to the rules which excludes the
possibility of other truths (Cohen et al., 1993).
This leads to H3:
H3. Subjects with higher tolerance of ambiguity will make less
ethical decisions (i.e., be more willing to violate ethical norms
personally and less willing to report others who do so).
I hypothesize this will be the case both in circumstances where the
individual confronts a personal ethical dilemma and where the issue is

E. Weisbrod / Advances in Accounting, incorporating Advances in International Accounting 25 (2009) 5763

whether to report on another individual who has violated norms of

behavior.
It is also possible that negative affect, positive affect and TOA will
produce synergistic affects; that is yield signicant interactions. TOA is
known to often interact with other personal attributes (such as risk
tolerance) to affect behavior. In this situation, individuals experiencing
negative affect may be biased towards making less ethical decisions,
but this bias may be weakened by the individual's low TOA for violating
ethical norms. Likewise, the effect of a negative affective bias on ethical
decision making may be magnied for individuals with higher TOA.
Therefore, I also propose Hypothesis 4:
H4. Affect and tolerance of ambiguity will have an interactive
effect on ethical decision making.

59

The second type of scenario is the organizational scenario. In the

ve organizational scenarios, subjects decided whether or not they
would report ethically questionable actions taken by members or
clients of the subject's rm. I refer to these as reporting scenarios.
These scenarios are less personal. The scenarios do not involve the
subject actively committing ethically questionable acts. Before
answering the scenarios, the subjects are given the following prompt
as motivation to take the reporting decision seriously:
Would you report it? The Independent Audit Committee of the
corporate board of directors encourages employees to report
unethical business practices and provides condential means to
do so. You graduated from college 2 years ago and are recently
married with your rst child due in 7 months. Would you report
the following conditions?

2. Methodology
To test these hypotheses I conduct an experiment using 157 upperdivision undergraduate accounting students from a large public
university in the southwest. Undergraduate accounting students are
relevant subjects because this study, while relevant to the general
practice of accounting, is particularly relevant to accounting educators
attempting to incorporate ethics into the university accounting
curriculum. Subjects completed the experiment during class time,
and were told that they were participating in an important study that
would assist the college in designing a curriculum to meet accreditation requirements (which was a truthful statement). No course credit
or nancial incentives were given for participation.
The experiment consisted of a number of brief ethics scenarios,
followed by questions designed to measure personal attributes of the
subjects, namely, tolerance of ambiguity and negative and positive affect.
Subject responses to the ethics scenarios serve as the dependent variables,
while subject personal attributes serve as the independent variables. The
instrument used in the experiment has been provided in Appendix A.

Subjects are then presented with ve reporting scenarios, and

asked to respond to each scenario on a ve point scale ranging from
1I denitely would report this to 5I denitely would not report
this. For example, scenario one asks subjects whether they would
report the Use of rm's assets or personnel by your boss for his/her
personal benet, or paying personal expenses from rm's funds and
accounting for it as a business expense. For a complete list of the ve
scenarios, see Appendix A.
The same procedure was used to develop a dependent variable,
REPORTING, for the reporting scenarios that was used to develop the
PERSONAL dependent variable. Subject responses were factor analyzed, and all ve scenarios loaded on a single factor. Thus, REPORTING
is a composite score ranging from 125 (the score being equal to the
sum of subject responses on each of the ve reporting scenarios).
Again, all of the actions described in the scenarios violate ethical
norms, meaning that higher values of the REPORTING variable
indicate a lower likelihood of reporting behavior which violates
ethical norms. REPORTING is used to test hypotheses H1H4.

2.1. Dependent variables

2.2. Independent variables

As discussed in Section 1.2, people may respond differently when

presented with different types of ethical dilemmas. Accordingly, my
experiment examines two types of ethical decision making scenarios.
The rst type of scenario is the personal scenario. In these six scenarios,
subjects are asked, What would you do? In each scenario, subjects are
asked by superiors to perform actions that have ethical consequences.
Subjects provide their answer for each scenario on a 5-point scale
ranging from 1I denitely would not agree to do this, to 5I would
feel comfortable doing this. I would denitely do this. For example,
scenario 1 states:

Following the ethical scenarios, subjects were presented with two

personality scales used to measure tolerance for ambiguity and affect,
the independent variables in the experiment.
First, subjects completed the MacDonald (1970) Ambiguity Tolerance scale. The MacDonald scale consists of 16 statements designed to
measure TOA. For example, the rst statement in the scale states An
expert who doesn't come up with a denite answer probably doesn't
know too much. Subjects indicate their level of agreement on a seven
point scale ranging from strongly agree to strongly disagree. Because
the study examines relative levels of TOA, subject responses to the
MacDonald scale were split at the mean to create a dichotomous
variable, TOA, identifying subjects as possessing either high or low TOA.
After answering the MacDonald scale, subjects completed the
Positive and Negative Affect Schedule (PANAS). The PANAS scale used
contains 16 adjectives related to positive affect and 16 adjectives related
to negative affect. Subjects indicate on a 15 scale the extent to which
each adjective describes their current mood. The PANAS scales have been
shown to be reliable and highly internally consistent, and the positive
and negative measures of the PANAS are largely uncorrelated (Clark et al.,
1988). Consistent with prior literature, factor analysis of subject
responses to the PANAS scale identies two distinct factors, which I
utilize to measure subjects' feelings of positive and negative affect.
Because I examine the relative effects of positive and negative
affect on ethical decision making, I split factor responses at their
mean, creating binary variables, PosAffect, and NegAffect, for positive
and negative affect, respectively. Thus, in my analyses, subjects are
identied as either experiencing high or low positive affect as well as
high or low negative affect. It is important to note that, as stated in
Section 1.2, positive and negative affect have been identied as

The head of division accounting directs you and a colleague to defer

recognition of material impairments to long-lived assets? Your best
estimate is that selected assets have lost 50% of their value. Your
colleague suggests We need to go along with this. Instead of
recognizing this loss this year, let's just wait it out and take another
look at it next year when we have more information.
See Appendix A for a full list of scenarios.
To test hypotheses H1H4, the responses to the six scenarios were
factor analyzed to determine if all of the scenarios measured the same
construct. Five of the six scenarios loaded on one factor (Scenarios 1, 3,
4, 5, and 6). Thus, I create a dependent measure, PERSONAL, to test my
hypotheses that is a composite score ranging from 125 (that being a
score equal to the sum of each subject's responses to each of the ve
scenarios identied in the factor analysis). All of the actions described
in the scenarios violate ethical norms, meaning that higher values of
the PERSONAL variable indicate less ethical behavior, or at least
behavior less consistent with ethical norms.

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E. Weisbrod / Advances in Accounting, incorporating Advances in International Accounting 25 (2009) 5763

Fig. 1. Estimated mean response on PERSONAL scenarios.

independent constructs, so that a single subject could be experiencing

both high positive and negative affect at the same time.
3. Results
3.1. Descriptive statistics
Overall, subjects tended to respond to the ethical scenarios in line
with ethical norms. The mean response on the ve personal scenarios

(Fig. 1 ) is 1.861, with a standard deviation of 0.972. Similarly, the

mean response on the reporting scenarios (Fig. 2) is 1.983, with a
standard deviation of 1.052. However, while the average subject
responses were in line with ethical norms (i.e., indicated unwillingess), a signicant portion of subjects in each scenario were either
unsure of how to respond (a score of 3 on the 5 point scale), or chose
to act against ethical norms (i.e. subjects responded with 4 or 5 on the
5-point scale), indicating a risk that accounting students may not
behave ethically when they enter the profession. Approximately 24%

Fig. 2. Estimated mean response on REPORTING scenarios.

E. Weisbrod / Advances in Accounting, incorporating Advances in International Accounting 25 (2009) 5763

Table 1
Subject responses to ethical scenarios.

Table 3
Univariate ANOVA results.

Panel A: PERSONAL ethical scenarios

Scenarioa
Meanb

Std. Dev.

% Responses 3c

1
3
4
5
6
Overall

Source
0.969
0.768
0.988
0.914
1.088
0.972

27.00%
11.70%
30.10%
18.90%
30.60%
23.70%

Panel B: ethical REPORTING scenarios

Scenarioa
Meand

Std. Dev.

% Responses 3c

1
2
3
4
5
Overall

1.186
0.976
0.85
0.983
1.101
1.052

33.70%
25.40%
11.40%
39.10%
35.20%
28.90%

2.077
1.454
2.036
1.699
2.041
1.861

2.197
1.938
1.44
2.177
2.166
1.983

Notes:
a
See Appendix A for descriptions of each scenario.
b
Subjects provide their answer for each personal scenario using a 5-point scale
ranging from 1I denitely would not agree to do this, to 5I would feel comfortable
doing this. I would denitely do this.
c
This column reports the percentage of subject responses greater than or equal to
three. A response greater than or equal to three on any ethical scenario indicates that a
subject is either unsure of how to respond to the scenario, or that the subject would be
willing to violate ethical norms.
d
Subjects provide their answer for each reporting scenario using a 5-point scale ranging
from 1I denitely would report do this, to 5I denitely would not report this.

of the responses to the personal scenarios and 29% of the responses to

the reporting scenarios fell into this category, with almost 40% of
subjects responding that they were unsure whether or not to report to
the audit committee a rm's failure to disclose related party
transactions in the nancial statements (Reporting Scenario 4).
Table 1 reports mean responses and the percentage of uncertain or
unethical responses for each scenario. Splitting the independent
variables at the mean results in fairly equal cell sizes. Cell sizes for each
independent variable are reported in Table 2.
3.2. Tests of hypotheses
To test the hypotheses, I use a 2 2 2 ANOVA design. Table 3 reports
the ANOVA results for both the Personal and Reporting scenarios. Positive
affect failed to register signicance either directly or interactively in
either the Personal or Reporting scenarios. Negative affect on the other
hand was both directly and interactively signicant among reporting
scenarios and interactively (but not directly) signicant among personal
scenarios. Thus, partial support is found for Hypothesis 1; Hypothesis 2
is rejected; and Hypothesis 4 is supported.

Table 2
Cell sizes of between-subjects factors.
Variable

61

N
Low

High

Panel A: PERSONAL ethical scenarios

TOA
PosAffect
NegAffect

74
81
78

83
76
79

Panel B: ethical REPORTING scenarios

TOA
PosAffect
NegAffect

73
80
76

82
75
79

Note:
This table reports the number of subjects in each cell after splitting each variable at its
mean. Low (High) indicates that subject responses were lower (higher) than the
mean response.

dF

Mean sq.

Panel A: PERSONAL ethical scenarios

Corrected model
128.460
Intercept
12235.533
TOA
54.606
PosAffect
7.876
NegAffect
14.073
TOAPosAffect
5.265
TOANegAffect
43.048
PosAffectNegAffect
3.974
TOAPosAffectNegAffect
1.331
Error
1429.910
Total
13989.000
Corrected total
1558.369

Type III SS

7
1
1
1
1
1
1
1
1
149
157
156

18.351
12235.533
54.606
7.876
14.073
5.265
43.048
3.974
1.331
9.597

1.912
1274.972
5.690
0.821
1.466
0.549
4.486
0.414
0.139

0.071
0.000
0.018

Panel B: ethical REPORTING scenarios

Corrected model
280.871
Intercept
14294.863
TOA
98.945
PosAffect
14.299
NegAffect
60.811
TOAPosAffect
19.006
TOANegAffect
56.943
PosAffectNegAffect
34.296
TOAPosAffectNegAffect
0.105
Error
1979.878
Total
16835.000
Corrected total
2260.748

7
1
1
1
1
1
1
1
1
147
155
154

40.124
14294.863
98.945
14.299
60.811
19.006
56.943
34.296
0.105
13.469

2.979
1061.351
7.346
1.062
4.515
1.411
4.228
2.546
0.008

0.366
0.228
0.460
0.036
0.521
0.710

0.006
0.000
0.008
0.305
0.035
0.237
0.042
0.113
0.930

Notes:
Indicates signicance at the 10% level.
Indicates signicance at the 5% level.
Indicates signicance at the 1% level.

Among Reporting scenarios, negative affect had a signicant

(p = .035) direct inuence on ethical decision making. As hypothesized, subjects experiencing relatively greater negative affect made
less ethical decisions. This is in line with prior literature, which
indicates that some forms of negative affect create an internal focus.
An internal focus could explain why negative affect had no effect on
personal ethical decisions, but reduced subjects' interest in reporting
the unethical behavior of others.
I now turn to Tolerance for Ambiguity and Hypothesis 3. TOA is
found to be signicant and in the predicted direction (p = .018, .008)
in both the Personal and Reporting scenarios. Subjects less tolerant of
ambiguity were less willing to violate ethical norms, with lower mean
responses on both PERSONAL (8.275 vs. 9.460) and REPORTING (8.843
vs. 10.448) scenarios.
Potentially most interestingly, both the personal and reporting
scenarios provide evidence in support of H4, the hypothesis that TOA
and affect will have an interactive effect on ethical decision making.
While I nd no evidence of an interaction between TOA and PosAffect,
I nd a signicant (p = .036, .042) interaction between TOA and
NegAffect in both the Personal and Reporting scenarios. The interaction is such that subjects with low TOA are unwilling to violate
ethical norms regardless of their affective state; however, subjects
with a higher tolerance of ambiguity are more likely to violate ethical
norms if they are experiencing higher negative affect, as illustrated in
Table 4. This may indicate that both TOA and negative affect can

Table 4
Estimated marginal means of interaction term.
Panel A: PERSONAL ethical scenarios
(dependent variable: PERSONAL)

Panel B: ethical REPORTING scenarios

(dependent variable: REPORTING)

TOA

TOA

Low
High

NegAffect
Low

High

8.500 (0.503)
8.633 (0.490)

8.050 (0.517)
10.286 (0.476)

Low
High

NegAffect
Low

High

8.823 (0.604)
9.211 (0.588)

8.864 (0.613)
11.686 (0.563)

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E. Weisbrod / Advances in Accounting, incorporating Advances in International Accounting 25 (2009) 5763

inuence ethical decision making, but that TOA has a more dominant
inuence. Future research should explore this interaction further.
3.3. Ancillary analysis
In addition to the main analysis, I also examined the inuence of
affective arousal on ethical decision making. In Gaudine and Thorne's
(2001) cognitiveaffective model of ethical decision making, the
authors theorize that both affective valence (positive or negative) and
affective intensity, which they refer to as affective arousal, inuence
ethical decision-making. Gaudine and Thorne's model states that
arousal will interact with positive affect to induce people to act on
their positive intentions and behave more ethically. Gaudine and
Thorne have no hypothesis for how arousal will inuence people
experiencing negative affect, noting that certain types of negative
affect, such as anger, can have different inuences on decision making
than other types of negative affect, such as depression. I examine the
effect of arousal generally.
Because I measure both the positive and negative affective state of
each subject independently, I am able to measure the joint affective
intensity of both types of affect in each subject. To do this, I create a
binary variable, AROUSAL, which I use to compare highly aroused
subjects, those who are experiencing both high positive and high
negative arousal, against low arousal subjects who experience neither
high positive nor negative affect. This analysis eliminates subjects who
scored highly on positive or negative affect but not both, leaving me
with a sample of 40 low arousal and 41 high arousal subjects. Interestingly, the mean responses of high arousal subjects were higher
(indicating a greater chance of violating ethical norms) than those of
low arousal subjects, contrary to Gaudine and Thorne's model. The
effect of arousal was marginally signicant (p = .058) in the personal
scenarios and signicant in the reporting scenarios (p = .039). It is
difcult to interpret these results beyond noting that the relationship
between affect and ethical decision making is complex and may not be
adequately explained by current models.
4. Conclusion
While ethics is clearly an important research area in accounting,
prior research on the connection between moral reasoning and ethical
behavior has yielded mixed results, indicating that we do not yet fully
understand how people make ethical decisions. One explanation for the
mixed results of past research is the existence of omitted (or noncontrolled) correlated variables. In an effort to bridge this gap, this paper
examines two personality attributes, affect and TOA, which prior
literature has indicated may inuence ethical decision making. While
the results of this study are largely inconclusive, they shed light on an
important area of accounting that has not been adequately researched.
Furthermore, the student responses to the ethical scenarios indicate that
a signicant portion of accounting students are either unaware of ethical
norms in the profession, or unsure of whether they would choose to
adhere to those norms when presented with ethical dilemmas.
I do not nd evidence of the relationship between positive affect
and ethical decision making predicted by Gaudine and Thorne (2001),
however, the results of the study indicate that in some circumstances,
negative affect may inuence ethical behavior, but in others it may not.
Future research should further explore the inuence of negative affect
and ethical decision making so that we can identify situations where
negative affect may increase the likelihood of unethical behavior.
I also nd a signicant relationship between tolerance of ambiguity
and ethical decision making. This relationship may explain the cultural
differences in ethical decision making documented in prior literature
(Wong-on-Wing & Lui, 2007). Furthermore, I nd a signicant
interaction between TOA and negative affect that has not yet been
explored in the literature. Generally, all of my results imply that
educators and practitioners may want to consider personality traits

when determining ex-ante the most effective way to educate students

about ethical decision making, and assessing ex-post the effectiveness
of ethical learning outcomes and/or monitoring the evolution of
ethical culture in the accounting practice.
This study has several limitations. First, the study was conducted
among undergraduate accounting students. Undergraduate accounting
students were chosen as subjects in order to provide insight into the
effectiveness of ethics education in accounting. The ethical decisions of
undergraduate students, however, may not accurately represent the
ethical decisions that practicing accounts make in real-world scenarios.
Second, my experiment does not control for factors known to inuence
ethical decision making, such as gender, which may bias my results. It is
also unclear whether subjects understood all of the scenarios. Fortypercent of subjects were either unsure or chose not to report a
company's failure to disclose related party transactions, implying that
some subjects may not have understood the nature or implications of
related party transactions. The ethical scenarios used in my study have
not been tested in prior literature, nor have they been established as
reliable tools for measuring ethical decision making. Finally, I measure
affect after subjects answered the ethical scenarios. Therefore, it is
unclear whether I am measuring subjects' affective state when
presented with the ethical scenarios, or whether I am measuring the
affective state induced in the subjects by requiring them to face difcult
ethical dilemmas. Future research should attempt to verify my results in
a more controlled setting with a carefully designed research instrument.
Appendix A
Survey questions
PART I. What would you do? Answer the following questions using
the scale below.
1.
2.
3.
4.
5.
1.

I denitely would not agree to do this.

I probably would not agree to do this.
Uncertain
I probably would do this but with reservations.
I would feel comfortable doing this. I would denitely do this.
The head of division accounting directs you and a colleague to defer
recognition of material impairments to long-lived assets? Your best
estimate is that selected assets have lost 50% of their value. Your
colleague suggests We need to go along with this. Instead of
recognizing this loss this year, let's just wait it out and take another
look at it next year when we have more information.
2. Corporate headquarters phones asking you as head of divisional
operations to soften (reduce) prots for the year. One way to do this
would be to accelerate discretionary costs from next year into the
current year? For example, start future R&D projects and advertising campaign planning this period. You have a daughter entering
college next year and has her heart set on an expensive private
college. There are career risks with not going along with corporate
leaders. Would you do it?
3. A current employee, a staff person just like you, has been difcult to
work with from day one; this employee truly is a self-centered
loner who does not seem to work well with anyone, and wastes
everyone's time with lots of complaints. In response to a direct
request by your department manager, would you intentionally
misle interofce memos supporting employee claims of gender
based harassment?
4. Your rm is facing a hostile bid by corporate raiders, who allegedly
plan to break-up the rm, close and sell off certain operations. A lot
of people would lose their jobs. To secure current investors'
support, the rm needs to show a good prot picture. Everyone is
being asked to do whatever they can to help improve the nancials'
bottom line. Would you agree to intentionally not adjust receivables' allowances (for bad debts) even through they should be

E. Weisbrod / Advances in Accounting, incorporating Advances in International Accounting 25 (2009) 5763

adjusted for changed economic conditions, for purposes of

enhancing the current year nancial statements? By themselves
the adjustments are not material to overall prot.
5. Your company produces toys for children and ordinarily tests new
product safety extensively, rarely ever nding any unsafe products.
In response to a call from corporate headquarters asking for more
prot, you are asked to start selling a newly developed product
immediately, prior to safety testing. Although it seems unlikely that
there will be a problem with the product, it will subsequently be
tested and modied as necessary. Would you start selling the new
product?
6. In response to a direct request from your supervisor seeking enhanced revenues, and for purposes of keeping your job, would you
assist in development of a marketing campaign known to be
deceptive regarding product capabilities and durability (not safety)?
PART II. Would you report it? The Independent Audit Committee of
the corporate board of directors encourages employees to report
unethical business practices and provides condential means to do so.
You graduated from college 2 years ago and are recently married with
your rst child due in 7 months. Would you report the following
conditions? Answer the following questions using the scale below.
1.
2.
3.
4.
5.
1.

2.

3.
4.

5.

I denitely would report this.

I probably would report this.
Uncertain
I probably would not report this.
I denitely would not report this.
Use of rm's assets or personnel by your boss for his/her personal
benet, or paying personal expenses from rm's funds and
accounting for it as a business expense.
Senior divisional management instructs personnel (not you) to
hold open books to hit sales or prot targets, reset dates on
computer clocks, or record subsequent period sales currently.
Senior divisional management instructs you to falsify documents
causing ctitious sales or receivables to be recorded.
In preparing annual reports for auditors you observe that senior
corporate management has disclosed neither related party relationships (e.g., board members, ofcers or relatives holding a signicant share of the rm's securities) nor signicant related party
transactions.
You observe what you believe is the use of non-monetary or round
trip transactions to pump up sales or revenues (e.g., loaning funds

63

to customers so they can make purchases from the rm with no

reasonable assurance the customer can repay the loan.)
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