1 / 97

by Jeffrey N. Barnes, CPA, MAcc Oral Defense Slides in Partial Fulfillment

Organizational Leadership and Ethical Climate in Utah’s Certified Public Accounting Profession (90-minute Presentation Slides). by Jeffrey N. Barnes, CPA, MAcc Oral Defense Slides in Partial Fulfillment of Requirements for the Degree Doctor of Business Administration

suelita-ypina
Download Presentation

by Jeffrey N. Barnes, CPA, MAcc Oral Defense Slides in Partial Fulfillment

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Organizational Leadership and Ethical Climate in Utah’s Certified Public Accounting Profession(90-minute Presentation Slides) by Jeffrey N. Barnes, CPA, MAcc Oral Defense Slides in Partial Fulfillment of Requirements for the Degree Doctor of Business Administration UNIVERSITY OF PHOENIX February 2013

  2. Chapter 1, Introduction • CPAs are critically involved with assuring fair presentation of financial statements. • Fraudulent financial reporting continues(Arens, Elder, & Beasley, 2012; Apostolou & Crumbley, 2007). • Foundations of fraudulent behavior are rooted in sociological, psychological, and moral-development theories (Albrecht, Romney, Cherrington & Roe, 1982).

  3. Chapter 1, IntroductionSociological Theories • Differential association, with focal leader, contributes to informing and perpetuating unethical behavior(Galliher & Guess, 2009). • CPA profession organizational structure lends to fragmented and departmentalized workplace environments(Darley, 2004). • Ethical climates are “. . . the perceived prescriptions, proscriptions, and permissions regarding moral obligations in the organization” (Victor & Cullen, 1988, p. 101).

  4. Chapter 1, IntroductionPurpose of the Study • Quantitative research study with correlation design to describe and quantify relationships between • focal supervisor’s leadership style, • subordinate’s ethical climate perceptions, • religiosity influence, and • regulations’ influence.

  5. Chapter 1, IntroductionSignificance of the Problem • Accounting profession to benefit from the study by, • understanding current state of organizational leadership, • finding confirmatory or disconfirmatory evidence that leadership correlates to ethical perceptions, • determining if religiosity and regulatory influence relate to leadership and ethical climate perceptions, and • designing leadership training interventions.

  6. Chapter 1, IntroductionSignificance of the Problem • A growing body of literature, although small in scope, provides some information about public accounting firms’ leadership, ethical climate, and firm personnel’s cognition of its importance (Bobek, Hageman, & Radtke, 2010; Gunz, Gunz, & McCutcheon, 2002; Jiambalvo & Pratt, 1982).

  7. Chapter 1, IntroductionOverview of the Research Design • This quantitative research study, with a correlation design, investigated the relationships between independent, dependent, and moderating (intervening) variables (Creswell, 2005). • The model variables are, • leadership style (IV), • ethical climate perception (DV), • religiosity (MV, treated as an IV), and • understanding of FSGO (MV, treated as an IV).

  8. Chapter 1, IntroductionOverview of the Research Design • The research sought to explore answers to the following questions: • To what degree do partners, managers, and supervisors’ various leadership styles relate to the subordinate’s perception of what are ethical expectations and behaviors to be followed? • To what degree does the subordinate’s knowledge of regulatory influence relate to the subordinate’s perception of the ethical climate and the focal leader’s leadership? • To what degree does the subordinate’s religiosity or compassionate service relate to the subordinate’s perception of the ethical climate and the focal leader’s leadership?

  9. Chapter 1, IntroductionOverview of the Research Design • H10: A leaders’ transformational leadership style does not relate to the subordinate’s perception of the firm’s ethical climate in Utah. • H20: A leaders’ transactional leadership style does not relate to the subordinate’s perception of the firm’s ethical climate in Utah. • H30: A leaders’ laissez-faire leadership style does not relate to the subordinate’s perception of the firm’s ethical climate in Utah.

  10. Chapter 1, IntroductionOverview of the Research Design • H40: Known exogenous regulatory/punishment factors, as perceived by subordinates, do not relate to the subordinate’s perception of the firm’s ethical climate and immediate leadership in Utah. • H50: The degree of service or church attendance does not relate to the subordinates’ perception of the firm’s ethical climate and immediate leadership in Utah. • Alternate hypotheses, for each of the null hypotheses, suggest that relationships exist

  11. Chapter 1, IntroductionOverview of the Research Design

  12. Chapter 1, IntroductionSummary • Established that fraudulent financial reporting continues • Suggested a background for the problem rooted in sociology, psychology, ethics, moral development; and perhaps influence by professionals’ regulations and religiosity • Stated the significance of the problem to the public and the accounting profession • Proposed a quantitative research project, with correlation design

  13. Chapter 2, Review of LiteratureIntroduction • The current study, • explains previous research related to leadership and ethical climate, which is sparse in the accounting profession, • providssecondary evidence regarding regulatory controlling subordinate effect, and • provides secondary evidence regarding the nascent emerging positive subordinate effects of religiosity.

  14. Chapter 2, Review of LiteratureDocumentation

  15. Chapter 2, Review of LiteratureMoral Philosophies and Ethics Theories • A review of moral philosophy, as founded in ethics theories, is useful for identifying the common struggles ethics systems seek to resolve. Moral philosophy can be categorized in a number of frameworks, this study categorizes as, • Maximizing self-interests, • Maximizing joint-interests, and • Standing on moral principles. • Related to accounting, criticisms exist for each of these moral philosophical frameworks

  16. Chapter 2, Review of LiteratureEthics and Effective Leadership • Underpinning leadership style is the individual’s ethical philosophy, whether that generally be leaning toward egoism, benevolence, or universal principles.

  17. Chapter 2, Review of LiteratureEthics and Effective Leadership • Leadership style had a correlation to moral development stages. Their research showed that managers in the highest stage of moral reasoning exhibited more transformational leadership traits and behaviors(Turner, Barling, Epitropaki, Butcher, and Milner (2002). • Similar results with the Norwegian Naval Cadets in which postconventional moral reasoning was positively correlated with transactional and transformational leadership(Olsen, Eid, and Johnsen (2006).

  18. Chapter 2, Review of LiteratureLeadership • Leadership is about influencing individuals and groups within an organization (Nahavandi, 2006). • Leadership has many definitions; however, all leadership definitions have the common thread of influencing others to accomplish organizational objectives. Important is the responsibility that leadership has to set the ethical tone about how to accomplish organizational objectives. • Leaders are responsible for creating an ethical work climate (Schminke, Arnaud, & Kuenzi, 2007). • Some evidence has shown that top management’s ethical climate standards and perceptions do not necessarily filter down to lower-level employees (Trevino, Weaver, & Brown, 2008).

  19. Chapter 2, Review of LiteratureFull-range Leadership Theory • The full-range leadership theory (FRLT) has been a relied upon as a valid continuum describing the range of leadership styles exhibited by effective organizational leaders (Lowe, Kroeck, & Sivasubramaniam, 1996). • Regarding the FRLT model, with its nine leadership descriptions (subscales), were stable and that leadership effectiveness lessened the further away the leadership style ventured from the transformational description down through transactional and to the laissez-faire leadership styles (Lowe, Kroeck, & Sivasubramaniam, 1996).

  20. Chapter 2, Review of LiteratureLeadership and Subordinate Socialization • The fundamental leadership relational association hypothesizes to affect an organizational ethical and moral climate (Neubert et al., 2009). • The most important ethical figures in an organization are the leaders and the values they possess, both by word and by deed. • Interpersonal leader-to-subordinate relationships influence ethical behavior and perceptions(Mumford, Waples, Antes, Murphy, Connelly, Brown, & Davenport (2009).

  21. Chapter 2, Review of LiteratureLeadership and Its Linkage to Ethical Climate • Supervisors “. . . influence employees’ perceptions of the policies and practices, i.e., ethical climate” (Wimbush & Shepard, 1994, p. 645). • Postulated that their results (i.e., correlation study findings) “show that managers’ attitudes, shaped by the tone set by top executives, significantly influence managers’ decisions to behave unethically or not” (Carpenter & Reimer, 2005, p. 125). • Finding correlative relationships between Bass and Avolio’s full-range leadership theory styles and ethical climate perception would be useful knowledge in the accounting profession.

  22. Chapter 2, Review of LiteratureEthical Climate Theory to Leadership • The AICPA’s Statement on Quality Control Standards (SQCS) No. 7, A Firm’s System of Quality Control, requires . . . policies and procedures to ensure that services are competently delivered and adequately supervised with independence, integrity, objectivity, and concern for the public trust (AICPA, 2011a). • The ethical principles of independence, integrity, objectivity, and concern for the public trust are intellectual virtues. These virtues should be foundational in the ethical decision making for members of the AICPA.

  23. Chapter 2, Review of LiteratureEthical ClimateTheory to Leadership • Brown, Trevino, and Harrison (2005) found that “. . . ethical leadership predicts outcomes such as perceived effectiveness of leaders, employees’ satisfaction with the job, and their willingness to extra effort into the work and to report problems to management” (as cited in Toor and Ofori, 2009, p. 536). • Victor and Cullen (1988) developed a theoretical framework for assessing the ethical context within which employees operate.

  24. Chapter 2, Review of LiteratureEthical Climate Theory

  25. Chapter 2, Review of LiteratureEthical Climate Theory • Victor and Cullen’s (1988) five empirically derived ethical climate types have remained rather stable over time and addressed in some limited accounting peer-reviewed journal articles (Martin & Cullen, 2006).

  26. Chapter 2, Review of LiteratureEthical Climate Theory

  27. Chapter 2, Review of LiteraturePublic Accounting Ethical Climate Summary • The several ethical climate research studies for public accounting indicate the importance of ethical climate perceptions on subordinate decision making(Buchan, 2005). • In this Asian study, the public accountants’ ethical climate perceptions of “. . . rules codes, caring, self-interest, social responsibility, and instrumentalism, while efficiency and personal morality were perceived higher in the private sector”(Venezia, Venezia, & Hung, 2010, p. 77).

  28. Chapter 2, Review of LiteratureExternal Control Factors—FSGO Regulations • Some important regulatory control efforts to curb corruption and fraud in U.S. business have been the establishment of the Federal Sentencing Guidelines for Organizations (FSGO) and related subsequent amendments as well as the Sarbanes-Oxley Act of 2002 regulations. • Commission determined, through input from their newly organized Advisory Board, to “. . . encourage organizations to foster ethical requirements as opposed to mere technical compliance that can potentially circumvent the intent or spirit of law or regulation” (FSGO, 2010. p. 738).

  29. Chapter 2, Review of LiteratureReligiosity • Religion is thought to influence business individuals’ ethical decision making and ethical climate perception within organizations (Weaver & Agle, 2002). • Recently, religiosity, spirituality and ethics are emerging, in management literature, as possibly related factors for positive effectiveness (Corner, 2009). • Communities with religious institutions, in which a higher discourse of spiritual values is taught and ritually and personally practiced, nurture spirituality. Spirituality, in a form of religious and community service orientation, enhance ethical behavior intention (Christensen et al., 2005).

  30. Chapter 2, Review of LiteratureSummary • An organization’s ethical climate, is founded on the collective foundation of it individuals moral and ethics philosophies. These moral and ethical philosophies are related to the five empirically derived ethical climate types found within organizations. • Organizational leadership shapes and is shaped by the organization’s ethical climate. Potentially affecting the public accountants’ perceptions of organizational leadership and ethical climate are two potential moderating variables, which are awareness of regulatory statutes and personal religiosity, respectively.

  31. Chapter 2, Review of LiteratureSummary (cont.) • Both the lack of empirical research into the public accounting profession and the possible insights correlative influence these two moderating variables could provide and substantiate the additional needed empirical studies regarding the current state of accounting firms’ ethical climate structure and the prevailing leadership style typically exhibited.

  32. Chapter 3: MethodTheoretical Model Design

  33. Chapter 3: MethodJustification for Quantitative Method • First, a researched body of knowledge already exists regarding the major concepts of leadership styles and their effect on subordinate employees’ perceptions of organizational ethical climate (Dahlin, 2009). • Second, this quantitative research with correlation design also soughtunderstanding of whether a social or psychological phenomenon possesses confirmatory reality(Campbell & Stanley, 1963). • Third, the quantitative research questions found answers to what degree a variety of variables correlatively impact the subordinate’s perception of the organizational ethical climate and leadership style.

  34. Chapter 3: MethodPopulation • In 2010, approximately 1,175 certified public accountants (CPAs), in the practice of public accounting, in the State of Utah and members of the Utah Association of Certified Public Accountants (UACPA, 2009). • There were 469 separate physical CPA firm offices in Utah at the time of the study, many with below five CPAs. Of the 469 firms, only 41 firms with five or more CPAs exist(UACPA, 2009). • 11 CPA firms provided written permission to contact organization personnel, via email, for the administration of the electronic survey of this researchstudy.

  35. Chapter 3: MethodPopulation(Cont.)

  36. Chapter 3: MethodSample Cochran’s Sample Size Formula Minimum Desired Sample Size Calculation of desired sample size is, n = [((1.96)2 * (1.25)2)/(.25)2]= 96.04 or rounding up, 97 respondents • n = (t)2 * (s)2 (d)2

  37. Chapter 3: MethodData Collection (Cont.) • The original request was sent on February 7, 2012, the second request was sent on February 18, 2012, and the third and last request was sent March 13, 2012. • The 257 email addresses, at the time the survey was administered, there was provided236 continuing valid prospective respondents. The reduction of 21 emails represented natural attrition from the firms. The number of survey participants was 103 from a target population of 236, providing a 43.6% response rate.

  38. Chapter 3: MethodPilot Study

  39. Chapter 3: MethodInstrumentation • Four instruments were used in this research study, the • Multifactor Leadership Questionnaire (MLQ), or standard MLQ, or also known as the MLQ 5X short, by Avolio and Bass (2004), • Ethical Climate Questionnaire (ECQ), by Victor and Cullen (1987, 1988), • Understanding of Federal Sentencing Guidelines for Organizations, by researcher (2012), and • Religiosity, by researcher (2012).

  40. Chapter 3: MethodResearcher Error with ECQ Instrument (Cont.)

  41. Chapter 3: MethodResearcher Error with ECQ Instrument (Cont.) • According to Bart Victor, Ph.D. (personal communication, August 2, 2012), who is one the originators of the Ethical Climate Questionnaire (Victor and Cullen, 1988), this study’s collected data would expect to still be meaningful. He provided the following guidance, . . . the data collection need not be reperformed; to address the scale error in the ‘Methods’ section of the dissertation; to state that the existing data means, variances, and correlations are meaningful and reportable; to suggest that the scale errors do not cause a systemic or universal disqualifying error, because the recorded survey respondents’ impressions about the perceived ethical climate types are still valid; to not transform the data, thus, to use the existing data as is; and to check for similar intercorrelations and reliability.

  42. Chapter 3: MethodResearcher Error with ECQ Instrument (Cont.) Victor & Cullen, 1988, Intercorrelations and Cronbach’s Alphas This Study’s Intercorrelations and Cronbach’s Alphas

  43. Chapter 3: MethodCorrelation Analysis Interpretive Scale

  44. Chapter 3: MethodANOVA Analysis • Prior to running the ANOVA analyses, assumptions for ANOVA were tested. The assumptions for normality were tested, which ascertain that the scores be normally distribution around the mean of the dependent variable. Histograms were developed for all the dependent variable ethical climate types. • Also tested was the homogeneity of variance, which requires that the groups have equal variances in the population. Scatterplots of dependent variable’s various ethical climate types were constructed to determine the absence of heteroscedasticity. Both histograms and scatterplot tests were performed visually.

  45. Chapter 3: MethodANOVA Analysis (Cont.) • ANOVA analysis was performed for those correlative relationships with statistical significance. ANOVA or analysis of variance provided theF-critstatistic (F-test, F),R2, and significance.

  46. Chapter 3: MethodUnivariate Analysis • Statistical analysis also treated the demographic categories, with sufficient subsample size, as independent variables. • Running univariate analysis of variances between the demographic independent variable and the leadership independent variable to the ethical climate’s dependent variables was performed. Those relationships that demonstrated significant relationships were reported

  47. Chapter 4: ResultsStatistical Analyses • Descriptive statistics • Assumptions Regarding Models Used • Normality of Distributions • Homoscedasticity • Findings for Hypothesis 1—Transformational Leadership’s Relationships to Ethical Climates • Findings for Hypothesis 2—Transactional Leadership’s Relationships to Ethical Climates • Findings for Hypothesis 3—Laissez-faire Leadership’s Relationships to Ethical Climates

  48. Chapter 4: ResultsStatistical Analyses • Findings for Hypothesis 4—Regulatory Influence Relationships to Leadership and Ethical Climates • Findings for Hypothesis 5—Religiosity’s Relationships to Leadership and Ethical Climates • Limited Cross-sectional Statistical Analysis • Post Hoc Power and Effect Size Analysis

  49. Chapter 4: ResultsDescriptive Statistics Respondents’ Personal Information

  50. Respondents’ Relationship to and CPA Firm Information Chapter 4: ResultsDescriptive Statistics

More Related