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Ethical Principles vs. Ethical Rules: The Moderating Effect of Moral Development on Audit Independence Judgments

Published online by Cambridge University Press:  23 January 2015

Terri L. Herron  and
David L. Gilbertson
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Abstract:

Recent calls have been made to move professional standards to a more principles-based perspective, supposing that emphasizing broad principles would eliminate the legalistic focus that rules may encourage, and accountants’ behavior would be more ethical and uniformly so. However, this supposition has yet to be empirically tested. The AICPA Code of Professional Conduct (Code) provides guidance in both forms: principles and rules. This experiment examines how the form of the Code affects independence judgments in a client acceptance context. We also examine the potential for levels of moral development to influence the effectiveness of the Code. We find that subjects are more likely to consider their independence impaired, and are more likely to reject a questionable audit engagement, when rules-based (principles-based) reasoners are provided with Code rules (principles). Given the popularity of the view that rules-based standards are undesirable, these findings have significant implications for the profession as principles-based ethical standards are discussed.

Type
Articles
Information
Business Ethics Quarterly , Volume 14 , Issue 3 , July 2004 , pp. 499 - 523
Copyright
Copyright © Society for Business Ethics 2004

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