Factors influencing ethical judgements of accounting practitioners

FORMULATION AND VERIFICATION OF ACCOUNTANTS THEORY

FAR 661 TUTORIAL 1 (QUESTION 1)

Prepared for: Miss Salina Binti Abdullah

Group: MAC220 6KPrepared by:Raja Nashafarina Arianny (2019881418) Siti Sayidatul Isya (2019801668) Muhammad Al Amin (2019496146) Faez Nordayini (2019801488)

Index

Positive vs Normative

Types of Theory

Defitinition

Part of Theory

Article Info

Formulation of Theory

Summary

Question 1 Answer

Question 2 Answer

Thanks

Conclusion

DEFINITION

Theory

Hendriksen's definition:

...the coherent set of hypothetical, conceptual and pragmatic principles forming the general framework of reference for a field of inquiry.

DEFINITION

Accounting Theory

Logical reasoning:

• Provide a general framework
• Development of new practices and procedures

There are 2 types of theory, namely:

• Positive Theory
• Normative Theory

Type of Theory

Positive Theory

- Expanded during 1970s - Explain the reasons as in 'Why' questions - People act in their own self interest - General Rule = More Scientific

Type of Theory

Normative Theory

- Used in the 'Golden Age' (1950s & 1960s) - Prescribing - Determine whether the idea is "Good" or "Bad" - Concentrate on Profit and Decision-usefullness - General Rule = More Humanities

Positive vs Normative

- Pescriptive- Represent real world situation

- Descriptive, explanatory or predictive- Involves observations of the relevant phenomena from which a problem is defined.

Formulation of Accounting Theory

• Deductive Approach
• Inductive Approach

Deductive Approach

- based on value judgement and personal opinion - start with own idea - based on arguments structure - more likely to Normative theory

Inductive Approach

- Look at probability of a situation - Not so predetermine - Logic & show tendency - More to positive theory

Parts of Theory

• Logic / Reasoning
• Evidence / Proof
• Inference / Conclusion
• Assumption / Biases
• Hypothesis
• Fallacies

Logic / Reasoning

• The structure that you use to demonstrate the truth of your idea
• Also known as the method that being used

Evidence- Just an addition to the idea - Can be used as a proof - Might be true and might be wrong

Proof - 100% true - Facts - Evidence which is convincing as it is true

vs

Inference/Conclusion

• What the theory was about.
• The explaination of the theories.

Assumptions/Biases

- True without strict evidence- There are 2 types of assumptions:

1. Concious
2. Subconcious

Hypothesis

- Ready to be tested- Not yet proved - Can be either correct or wrong theories

Fallacies

- Argument of an idea that sound logical- In fact, it is false or misleading- There are 2 types of fallacies:

1. Relevant
2. Insufficient Evidence

Article Info

Article Info

Title:

Factors influencing ethical judgements of accounting practitioners: some Malaysian evidence

Article Info

Journal

International Journal of Social Economics

Volume

48

Date

1 JANUARY 2021

SUMMARY

• To investigate the relative effect of demographic factors and business ethics value on the ethical judgments of accountants

• Includes gender, age, current status, educational qualification, and corporate ethical values as internal factors and corporate ethical values as external factors
• It showed the importance of corporate ethical values and age, while gender is slightly important.

SUMMARY

• Creating an ethical environment in the organization implies that accountant in companies with a higher level of ethical values are more ethical in making their decisions
• Findings indicate that current position has no influence on accounting practitioners' ethical judgments
• While professional qualification does matter when only internal considerations are considered.

SUMMARY

• Method: Using questionnare

- To elicit accounting professionals' perspectives on organisational ethical principles and ethical judgments.

• 2 research questions in this article :-

- Do demographic factors influence ethical judgements of accounting practitioners?- To what extent do corporate ethical values influence ethical judgements of accounting practitioners?

Question 1:

Type of theory

Positive Theory

Reasons it is positive :-

Stating the factors that lead to influencing the ethical judgement of accountant - incorporates gender, age, current position, educational qualification as internal factors and corporate ethical values as the external factors

Positive Theory

Reasons it is positive :-

Give prediction - Individuals experience a three-level development process, which is associated with levels of moral reasoning. - At the most basic level (usually children), individuals tend to follow rules to either obtain rewards or avoid punishments.

Inductive Approach

Reasons:

- where specialized skilled employees were less likely to exhibit ethical behaviour.

- employees were less likely to compromise ethical values if managers were perceived to act ethically.

Question 2:

Scientific Method

Reasearch Method

3. 201 completed survey out of 742 survey that were sent to non- financial companies

2. To elicit opinions from accounting practitioners on corporate ethical values and ethical judgements.

1. Questionnaire survey

Findings & Analysis

• descriptive statistics
• Panel A: Continuous Variables
• Panel B: Categorical Variables

Discussion on Findings

• support to Kohlberg’s theory of moral developments

• significance of corporate ethical value in influencing ethical judgement
• result is consistent with past reseachers

CONCLUSION

• Researcher are using :-

- positive theory instead of normative - Inductive approach instead of deductive

Thanks!