ACCOUNTING ETHICS EDUCATIONAL INTERVENTIONS: A COMBINATION OF BOTH THE DISCRETE AND PERVASIVE METHOD

ACCOUNTING ETHICS EDUCATIONAL INTERVENTIONS: A COMBINATION OF BOTH THE DISCRETE AND PERVASIVE METHOD Barry Stephens, Bemidji State University David Smith, Bemidji State University ABSTRACT The financial collapses of industry leaders such as Enron, Sunbeam, WorldCom, Tyco, AIG and HealthSouth brought about questions as to the ethical training of the involved accountants and auditors (Jennings, 2004). With these events over the past decade, attention has been drawn to the importance of ethical behavior in the practice of accounting. Accounting educators are facing a challenging time and must determine how to instill in their students the importance of ethical behavior in accountants (Gaa & Thorne, 2004). The purpose of this study is to examine the effectiveness of ethics educational interventions in promoting student moral development through a discrete ethics course and with ethics content pervasively embedded across the business and accounting curriculum. This study investigated both accounting context-specific moral reasoning and general moral reasoning. The results of this study showed significant improvement over two semesters in both accounting context-specific moral reasoning and general moral reasoning scores. No significant difference in moral reasoning was revealed in gender and age or classification. INTRODUCTION Enron lost $90 billion of shareholder value in three weeks that resulted in a declaration of bankruptcy in December, 2001 (Beggs & Dean, 2007). This collapse of Enron in 2001 was brought about by mismanagement and accounting malpractice and led to the subsequent demise of Enron s accounting and auditing firm, Arthur Andersen in 2002. Arthur Andersen, one of the Big Five accounting firms, was accused of overlooking Enron s questionable accounting practices of overstating revenues and underreporting liabilities. These actions resulted in a general lack of confidence in the accounting profession (Alleyne, Devonish, Nurse & Cadogan- McClean, 2006). In addition to those failures, the financial collapses of other industry leaders such as Sunbeam, WorldCom, Tyco, AIG and HealthSouth brought about questions as to the ethical training of the involved accountants and auditors (Jennings, 2004). These failed companies

fostered a culture of aggressive accounting and engaged in complex creative accounting practices that deliberately obscured their true financial position and performance (Dellaportas, 2006). These events have brought attention to the importance of ethical behavior in the practice of accounting. These events also show the need to instill in accounting students the importance of ethics in accounting. New opportunities exist for educators in the inclusion of ethics in accounting education (Gaa & Thorne, 2004). Accounting educators can address these opportunities by enabling students to be better prepared to deal with ethical dilemmas in their workplace. Educators need to convey the role of ethics in the students future professional lives and enable them to develop critical perspectives on ethical issues (Haywood, McMullen, & Wygal, 2004). Although these educators may recognize the need for ethics training, they may not possess the knowledge or expertise to provide such training. Accounting educators need to continue to upgrade their knowledge base and adapt curriculum to include more and more technical topics. This can be achieved by focusing on ethics research and by adapting advances in that research to accounting curriculum (Gaa & Thorne, 2004). Much of recent ethics research has investigated individuals ethical decision process and the factors that influence the development and/or resolution of that process (Gaa & Thorne, 2004). Thorne (1998) found strong links exist between accountants ethical decision process and their professional judgment. Therefore, accounting ethics research should focus not only on the outcome of the ethical decision but also on the underlying reason for that decision (Gaa & Thorne, 2004). The traditional focus of accounting ethics education research was developed to learn how to increase cognitive moral capability of the students entering the accounting profession. An individual s cognitive moral capability is defined as the degree to which an individual can utilize cognitive moral structures in the moral decision making process; this is the most sophisticated cognitive moral structure an individual can use to resolve moral dilemmas (Kohlberg, 1958; Thorne, 2001). Numerous studies using a cognitive-development perspective show that accounting students have a lower cognitive moral capability than other students of similar age and education (Thorne, 2001). DEMOGRAPHIC VARIABLES AND EDUCATIONAL INTERVENTIONS Two lines of research using the cognitive-developmental perspective investigated ways that accounting educators may encourage the development of the cognitive moral development of accounting students. First line of research explores the different effect of educational interventions on accounting students cognitive moral capability. This research demonstrates that an emphasis on ethics, professionalism and liberal arts education generally encourages the development of the cognitive moral capability of the accounting student. The second line of research investigates the association of demographic variables and the accounting students cognitive moral capability (Thorne, 2001). This second line of research suggests how environmental factors and demographical variables such as culture, gender, age and the level of education and religious affiliation and attendance influences ethical behavior (Wimalalasiri, 2004). MacDonald (2000) defined the concept of culture as the shared beliefs and symbols of a group of individuals that is distinct from the concept of nation as several cultures may exist within one nation (Thorne & Saunders, 2002). Therefore, different cultural backgrounds may lead to different ways of perceiving the

world and affect the individual s ethical reasoning. Research also indicates that individuals from diverse cultures differ in sensitivity to ethical situations (Cohen, Pant & Sharp, 1992; MacDonald, 2000; Thorne & Saunders, 2002). GENDER Gender differences in ethical decision making have been the focus of numerous empirical studies. The results of these studies have been diverse with numerous studies indicating that females behave more ethically and other studies show that gender has no effect (Cruz, 2003). Bass, Barnett and Brown (1998) found that women, generally, are socialized to be more sensitive ethically than are men, although, this advantage may be reduced by external pressures (Shawver, Bancroft & Sennetti, 2006). Results of other studies indicated that females and males significantly differ in judgments of whether a perceived action is ethical and whether their peers were likely to engage in such actions; the difference was even more significant when the underlying moral reasoning was explored (Malone, 2006; Cohen, Sharp & Sharp, 1998). Gilligan (1982) suggests that females social development focuses on relationships while male social development stresses individually. Based on this, females moral development and ways of reasoning are fundamentally different from males. According to Gilligan (1977) female moral reasoning is driven by relationships and obligations known as the ethic of care and male moral reasoning uses the justice framework or relying on rights and duties as shown by Kohlberg s (1981, 1984) model of moral development (Cagle & Baucus, 2006; Dellaportas, 2006). Lyon (1985) extended Gilligan s (1977) study and suggested that women differ from men by using a different moral reasoning process. The study argued that men use discrete information and situations in considering moral choices; and women decide ethical issues by using a more continuous ethical consciousness. Callahan (1990) also extended Gilligan s (1977) research and argued that based on different socialization experiences of men and women, that they make moral judgments in distinctly different ways. This study also stated that women are socialized more communally and men are more socialized as individuals. These and other studies conclude that the differences in moral reasoning between men and women are not exclusively biological but may be due to differences in socialization characteristics (Elm, Kennedy & Lawton, 2001). Although, reacting differently to fictional ethical dilemmas may not necessarily lead to a more ethical behavior when confronted by real world situations (Borkowski & Ugras, 1998); but, women were the whistle blowers at both Enron (Sherron Watkins) and at WorldCom (Cynthia Cooper) (Emerson, Conroy & Stanley, 2007). Other studies argue that there or no significant differences in ethical perception or behavior between men and women (Izraeli and Jaffe, 2000). Smith, Oakley and Ellwood (1997) in their study of 318 undergraduate and graduate business students, found no gender-related differences in context-specific issues dealing with dilemmas that violated the law or organizational policies. In either case gender alone may not be the most significant factor or maybe combined with other factors such as age and environment or culture (Shawver, Bancroft & Sennetti, 2006). AGE AND LEVEL OF EDUCATION Another key influence on ethical behavior is age (Emerson, Conroy & Stanley, 2007). Borkowski and Ugras (1992) found that ethical positions seem to change with age, although they could identity no single factor causing this change. The study found that freshman and juniors are more justice-oriented than MBA s; the MBA s tended to be more utilitarian in their approach

to ethical dilemmas. In their 1998 meta-analysis of 47 studies, Borkowski and Ugras found that individuals behavior and attitude tended to be more ethical with age which supported Kohlberg s (1984) theory that individuals may experience a moral maturation as they proceed through the stages of moral behavior (Emerson, et al, 2007). Borkowski and Ugras (1998) concluded that 13 studies showed that older students responded more ethically than the younger students; whereas, only two studies showed that younger students where more ethical. Other empirical evidence shows that moral reasoning increases with age and level of education; therefore, formal education may be an important factor in moral judgment development (Dellaportas, 2006; Abdolmohammadi & Reeves, 2000). Rest and Narvaez (1994) found unusual gains in moral judgment with age, but also found that education was a far more powerful predictor of moral development with the general trend that the longer students continue in formal education the higher the DIT scores tend to be. When formal education ceased, DIT scores tended to plateau (Abdolmohammadi & Reeves, 2000; Rest and Narvaez, 1994). Rest (1986) found in reviewing two meta-analyses of around 10,000 participants that age and education accounts for 30 to 50% of the variance in DIT scores (Emerson, et al, 2007). Age has been a significant variable in the study of ethics, but typically the respondents are non-student groups; a review of literature using university students generally find limited or no evidence in age differences (Roger & Smith, 2001). EDUCATIONAL INTERVENTIONS Borkowski and Ugras (1998) completed a meta-analysis of 56 dissertations involving ethics interventions with business students. The study found that by integrating ethics across the business curriculum, allows students early in their education to learn that ethical behavior is valued by the business community. By doing so, students may demonstrate ethical behavior and attitudes sooner and may eventually appreciate that behavior for its intrinsic value rather than the perceived extrinsic value of employment rewards. Rest (1986) identified four types of educational interventions: using the case study approach by engaging students in active problem-solving of controversial moral dilemmas; using the personality development approach by involving students in community service; using the academic approach by teaching students academic content such auditing standards; and by using short-term interventions that are less than three weeks and of any type (Dellaportas, 2006). Other research indicates that ethical behavior may be positively affected depending on the type educational interventions (Izzo, 2000). These interventions include case studies, role-playing, research, community service and testing over standards and codes of conduct (Earley & Kelley, 2004). Dellaportas, (2006) found that educational interventions can be effective if the program last longer than three weeks and if at least one of the interventions involves the students in discussions of controversial moral dilemmas. Thomas (2004) found that two methods that expose students to ethical knowledge and to inspire them to behave in an ethical manner are case studies supplemented with stories of moral courage and practical experience through community service. Bean and Bernardi (2005) recommend that multiple ethics courses be required with the initial course being a general education course rooted in philosophy and ethical reasoning, followed by an accounting-specific course in ethics. This course would expose students to real-world dilemmas that reflect the complexities and technicalities they will confront in the future.

HISTORICAL BACKGROUND The study of ethics began with Socrates in ancient Greece. He believed ethics or virtue was associated with knowledge. Plato, as a student of Socrates, continued his work and wrote books, which presented Socrates ideas of unity between virtue, knowledge and happiness. Aristotle continued with this teaching by asserting that there are two kinds of virtue that which is learned and that which becomes a habit from use (Venezia, 2005). The foundation of modern ethical reasoning as a distinct topic primarily comes from research conducted by Jean Piaget and Lawrence Kohlberg on cognitive development. Cognitive development is the process by which individuals develop patterns of thinking, reasoning, recollection and problem solving. Piaget originally constructed the theory as a result of studying the morality of children and described their cognitive development as a series of stages of reasoning where the individual assumes increasingly more differentiated roles in societal situations (Izzo, Langford & Vitell, 2006; Marnburg, 2001). Kohlberg expanded Piaget s work by identifying three levels of moral judgments with each level containing two stages (Venezia, 2005). Kohlberg theorized that individuals progress through a series of stages over the three levels classified as pre-conventional, conventional and post-conventional. He further theorized that as people mature morally, they cognitively move to higher levels of moral development (Kohlberg, 1969; Izzo et al, 2006). The distinguishing feature of cognitive development approach is the focus on the individual as the one that determines right and wrong. Kohlberg believed that moral judgment is universal, although, several research findings showed that cultural differences might affect that judgment (Venezia, 2005). In the pre-conventional level, individuals justify their actions largely on the basis of pure self-interest. Beginning with stage one, the individual is concerned with physical consequences such as avoiding punishment, maximizing rewards and obeying authority figures (Mudrack, 2003). In society, there is nothing wrong if you can get away with it and avoid punishment (Ampofo, 2004; Mujtaba, 2003). In stage two, the individual is seeking to satisfy his or her own needs above others, but there is an aware that others have needs (Kohlberg, 1969; Gilligan, 1982; Izzo, 2000; Mudrack, 2003; Mujtaba, 2003). At the conventional level, individuals are characterized by an adherence to legal concepts and reference group norms in resolving ethical dilemmas. In stage three of this level, the individual s moral reasoning is reflected by unquestioned acceptance of the majority assessment of acceptable behaviors; majority is defined as family, group or nation (Mudrack, 2003). Good behavior is used to gain approval from others (Mujtaba, 2003). In stage four, the individual begins to incorporate religious, legal or societal views in their decision making process and develops an understanding that this behavior is for the common good (Kohlberg, 1969; Gilligan, 1982; Izzo, 2000; Mudrack, 2003; Mujtaba, 2003). The post-conventional level is characterized by independent thinking. The individuals have self-chosen ethical principles that are logical, comprehensive and consistent. In stage five, individuals are impartial in resolving conflicting social issues and stage six uphold universal ethical principles regardless of laws or group norms (Kohlberg, 1969; Gilligan, 1982; Izzo, 2000; Mudrack, 2003; Ampofo, 2004). In James Rest s (1979, 1994) Model of Ethical Action, he theorized that ethical reasoning consists of four components. Grounded in the cognitive development perspective (Kohlberg, 1969), this model describes key components of the ethical decision process. Component one,

identification of an ethical dilemma, is initiated through the awareness that a dilemma may affect the welfare of others. Component two states that once the ethical dilemma has been identified, the individual evaluates potential outcomes and comes to an ethical judgment. In component three, the intention to act ethically, involves a value assessment of the choice made versus other alternatives in formulating intent to act. In the final component of ethical action/behavior, the individual carries out the ethical action (Jones, Massey & Thorne, 2003). Other researchers have expanded on Rest s model by recognizing that ethical reasoning is influenced by multiple variables and their interactions. These variables include general demographic characteristics such as gender and political orientation (Gilligan, 1982), ethical development (Thorne, 1998), personal values, character and training and experience (Jones et al, 2003). Rest (1979, 1994) also defines two types of moral reasoning as prescriptive reasoning and deliberative reasoning. Prescriptive reasoning describes what should ideally be done in resolving a particular ethical dilemma. Deliberative reasoning describes the intent to act on a particular ethical dilemma. When applied to accountants, prescriptive reasoning is analogous to the formulation of professional judgment of the ideal resolution to a dilemma, and deliberative reasoning is analogous to the accountant s intent to exercise that judgment. Ethical dilemmas are defined for this study as situations for which there is no single ethically correct answer (Thorne, 2000). Predicated on Kohlberg s Cognitive Moral Development Theory and the Model of Ethical Action, Rest (1979, 1994) developed the DIT to measure ethical reasoning ability (Venezia, 2005). The DIT was endorsed by Kohlberg as a practical instrument for measuring cognitive moral development and has become the most used assessment for that purpose (Trevino, 1992; Kracher, Chatterjee & Lundquist, 2002; Rogers & Smith, 2001). The difference between Kohlberg s research and the DIT is in the method of data collection; Kohlberg used the qualitative method of research whereas Rest used a quantitative method to analyze and ascertain the level of moral maturity on the Kohlberg scale (Venezia, 2005). The DIT, a pencil and paper survey instrument, presents participants with moral dilemma scenarios. Each scenario requires the participants to complete three tasks. The first task requires the participant to indicate a decision or action choice; the second task requires the individual to rate the 12 items that led to the first task on a five point scale; and finally, of those 12 items, the individual selects the four most important in reaching the decision. These items are designed to be consistent with the stages of the cognitive moral development (Mudrack, 2003). Several relevant scores come from responses provided on the DIT. One of the most commonly used scores is the P-score, which stands for principled morality. The P score expresses post-conventional moral items, the sum of Stage 5 and 6, that each individual ranks as important. Therefore, a high P-score indicates the individual s ability to reason at higher stages of moral development according to Kohlberg s framework. The distinct advantage of the P- score is the ability to identify changes in moral reasoning by comparing differences in test scores before and after interventions in ethics education (Dellaportas, 2006; Mudrack, 2003; Rogers & Smith, 2001). A weakness in the P-score is that a great deal of relevant information is discarded in the calculation process. With a reliance on ranking data, there is no incorporation of rating data. In addition, there is no information about lower stage scores. Therefore, individuals who rank large numbers of statements using post-conventional moral reasoning as important in making a decision receive high P-scores; and individuals who do not rank decisions reflecting such

reasoning receive low P-scores. There is no distinction between individuals using preconventional reasoning as opposed to conventional reasoning (Mudrack, 2003). The D-score or developmental score represents an overall index of moral development and utilizes information from all stages of moral development. A higher D-score implies that the individual rated more items reflecting higher levels of moral reasoning than of the items reflecting lower levels of moral reasoning (Mudrack, 2003). The U-score or the utilizer score assesses the degree of consistency between action choices and the DIT survey items rated as most important. The U-score also represents the ratio between actual consistency and total possible consistency between choices and ratings (Mudrack, 2003). With the introduction of the Defining Issues Test-2 (DIT-2), the Center for the Study of Ethical Development included in addition to the P-score a new measurement known as the N2 score. This score incorporates more information than the P-score; while the P-score measures the rankings of the importance of ethical decision factors, the N2 score also measures the related ratings that respondents develop in arriving at the rankings of the ethical decision factors. The N2 score has a similar mean, standard deviation and meaning as the P-score; and the N2 score represents an incremental improvement of the DIT-2 over the DIT. This improvement includes contemporary ethical scenarios and a slightly greater reliability and validity. The DIT-2 also has five scenarios instead of the six in the DIT, which makes the DIT-2 more efficient; and the purge rates due to validity checks are also lower (Bailey, Phillips & Scofield, 2005; Rest, Narvaez, Thoma, Bebeau, 1999b). LEGISLATION AND ACCOUNTING STANDARDS Accounting organizations such as the Institute of Internal Auditors and the American Institute of Certified Public Accountants (AICPA) maintain codes of professional conduct to guide the accounting profession (Alleyne et al, 2006). The AICPA Professional Standards states that in order for accountants to maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity. The AICPA goes on to define integrity as an element of character fundamental to professional recognition which requires an accountant to be, among other things, honest and candid and service and trust should not be subordinated to personal gain. The AICPA concludes that integrity is measured in terms of what is right and just (American Institute of Certified Public Accountants, 1991, p. 4311). Adherence to these codes should provide ethical guidance to accountants and auditors and in turn inspire public confidence in the accounting profession. Given the scandals discussed previously, this has not been the result (Alleyne et al, 2006). Instead the federal and state governments responded to the corporate scandals with financial regulatory reforms. One of the resulting reforms was the enactment of the Sarbanes- Oxley Act of 2002 (SOA). SOA contains sweeping reforms over financial reporting, corporate governance, and auditing. One of the mandates of the Act included ethical changes that impacted accountants in both industry and public practice (Thomas, 2004). Another mandate requires CEOs and CFOs to be personally liable for financial statement information filed with the SEC (Ampofo, 2004). The SOA requirements are enforced by strict criminal and civil penalties including fines in the millions of dollars and prison terms of up to 20 years (Sarbanes-Oxley Act, 2002). The SOA also established the Public Company Accounting Oversight Board (PCAOB) to oversee the audit of public companies subject to the securities laws (Sarbanes-Oxley Act, 2002). The PCAOB was created with broad powers over the accounting profession; and the mandate of

the PCAOB is to accept or reject any pronouncement issued by the Financial Accounting Standards Board (FASB). Public accounting firms are required to register with the PCAOB if they audit companies filing financial statements with the SEC and are subject to inspections by the PCAOB. PCAOB has the authority to conduct investigations and disciplinary proceedings, impose sanctions upon accounting firms and associated persons and to enforce compliance with the SOA (Ampofo, 2004, Sarbanes-Oxley Act, 2002). Statement of Auditing Standards (SAS) 99 was released to clarify issues related to ethics and fraudulent financial reporting (Shawver, 2004). Most State Boards of Accountancy have increased educational requirements for CPA candidates to 150 credit hours including 3 credit hours of ethics education. In addition, ethics educational requirements have been increased for current licensees (Ampofo, 2004; Thomas, 2004). An example of such an increase is the Texas State Board of Public Accountancy with the requirement of two hours of board-approved ethics education every three years and a one hour ethics course on the Rules of Professional Conduct every two years (VanZante, 2005). In addition to individual state boards, the National Association of State Boards of Accountancy are reviewing comments on two exposure drafts, Rules 5-1 and 5-2. A major issue in these drafts is the requirement of three ethics courses in accounting education as part of the 150 credit-hour requirement (Bean & Bernardi, 2005). The Association to Advance Collegiate Schools of Business (AACSB) with over 500 member schools is generally regarded as the world s most prestigious accreditor of business school programs. In 2004, the AACSB created a taskforce that called on business schools to increase their commitment to teach ethical responsibility at both the individual and corporate level (Beggs & Dean, 2007). ETHICS EDUCATION In addition to regulatory reforms, enriched ethics education in accounting is needed to restore the credibility of the profession (Dellaportas, 2006). In order to fulfill these requirements, accountants should have both technical expertise and moral values. Technical competence of professional accountants is rarely in question; but instead critics claim a lack in ethical standards and behavior of accountants (Gaa, 1994; Dellaportas; 2006). By possessing moral values, auditors are enabled to make moral judgments to fulfill their ethical obligations to society. Auditors, in particular, must not only recognize ethical issues such as conflicting stakeholders interests, but must be committed to take the action that is morally appropriate (Mintz, 1995). This commitment to ethical behavior refers to a strong desire to respond correctly even when the results of that cause economic, social or psychological costs. For accountants to meet ethical and professional obligations, they must have the intention to act according to the moral point of view as well as the ability to do so. Ethical conflict in accounting occurs when the accountants perceive their responsibilities toward one group or their own self-interests are inconsistent with their duties toward another group. The way that accountants deal with these conflicting duties is a fundamental matter of character (Mintz, 1995). Ethics for the purposes of this study is defined as the field of inquiry involving the actions of people in situations where those actions affect those people and others around them (Gaa and Thorne, 2004). Recurring evidence of unethical actions and fraudulent reporting may not be a surprise when accounting ethics is not significantly taught in most institutions of higher learning (Dellaportas, 2006). Concerns about the level of unethical behavior in accounting practice has been a catalyst for the integration of ethics instruction into accounting courses. Typically ethics

has been taught in auditing courses and is often focused on code and rules rather than the underlying ethical issues (Dellaportas, 2006; Kerr & Smith, 1995). Ethics instruction is starting to become regarded as an essential part of the socialization of accounting students into the profession (Bay & Greenburg, 2001; McNair & Milan, 1993). Earley and Kelley (2004) examine the effect of ethics education on moral reasoning in a single-semester auditing course. During the semester, four educational interventions were used including explicit classroom training in professional ethical standards, exposure to an ethical decision framework, accounting specific ethical videos and use of cases in ethical dilemmas in accounting. The first intervention included reading, discussing and assigning homework on Generally Accepted Auditing Standards and on the AICPA Code of Professional Conduct. The second intervention involved analyzing cases throughout the semester; the cases specifically dealt with moral and ethical issues. The third intervention involved videos depicting real-life situations and in the final intervention, students analyze a case using the seven-step process developed by Mintz in 1997. The steps are: determine the facts, identify the operational issues, identify the accounting issues, identify the stakeholders and obligations, make an ethical analysis of the alternatives, decide on the course of action and double-check the decision (Earley & Kelley, 2004). The researchers administered two instruments: the AEDI that measures accountingcontext specific scores and the DIT. Each instrument was given at the beginning and end of the semester. The results of the study indicated that educational interventions in ethical issues caused a significant increase in accounting-context specific moral reasoning. The results also demonstrated no corresponding significant increase in general moral reasoning. Earley and Kelley (2004) concluded that by providing accounting students the ability to effectively reason through moral dilemmas, future judgment errors in accounting and auditing might be minimized. In the Earley and Kelley (2004) study, educational interventions were limited to lessons within an existing auditing course. This study and other research have shown that interventions limited to single-semester auditing course may not be conducive to significant increases in the levels of moral judgment development (Dellaportas, 2006). Dellaportas (2006) used a singlesemester course that focused entirely on ethical content called Ethical Issues in Accounting. The primary aim of the course was to sensitize and increase students understanding of ethical issues in accounting and expose students to diagnostic tools that would aid in the identification and resolution of ethical dilemmas. One of the 12 topics covered in the course was Kohlberg s theory of moral reasoning and development. In addition, the students were presented with a number of case studies for peer led discussion and analysis. This discussion and analysis was facilitated by the introduction of analytical tools such as normative ethical theories, professional duties and responsibilities and ethical decision-making models (Dellaportas, 2006). The sample consisted of 41 senior accounting students of which 28 were female and 13 were male. The DIT was given as a pre-test and post-test. The results of the study showed that having a dedicated course in ethics with an emphasis in dilemma discussion produced positive and significant effect on the DIT P-scores. Students moral development was linked to the learning of ethical theories such as Kohlberg s theory of cognitive moral development, peer learning and moral discourse (Dellaportas, 2006). One possible limitation of the Dellaportas (2006) study was that the DIT was developed presupposing that a student was unaware of moral judgment theory and that by exposing students to Kohlberg s works could introduce a possible contamination into post-testing (Rest, 1986; Dellaportas, 2006). Dellaportas (2006) believes that while the students did learn Kohlberg s

theory they were not exposed to DIT questions or scoring procedures and therefore were uninformed on how to manipulate test questions. In addition, exposure to Kohlberg s theory should not be viewed as an artificial increase in DIT results, but should be seen as a true indication of moral judgment learning (Rest, 1986; Dellaportas, 2006). The study by Shawver (2004) explores the impacts of accounting ethics education using a single-semester capstone course on professional responsibility required of all accounting seniors. Interventions used during the course include exams, textbook reading, case analyses, a research paper and required participation in class discussion. Ethics cases are analyzed by identification of the ethical issue, alternative actions and the pros and cons of each. Results of the study showed slight increases of the DIT-2 (short version of the DIT) Principled Score (P-score) from the initial test at the beginning of the semester to the final test at the end of the semester but this change was not statistically significant. Students ability to identify unethical accounting and business actions also improved as measured by Impression Management Scale (Shawver, 2004). Cagle and Baucus (2006) studied 54 undergraduate and 32 graduate finance students at a private Jesuit university. The study used a single-semester course called Ethics, Religion and Society; and ethics was blended into an undergraduate and graduate finance course using a combination of case studies and class discussion. The difference between this study and previous studies reviewed is that the cases reviewed were not pre-selected by the instructor, but the students were required to research and generate their own cases. This enabled the students to recognize and categorize ethical issues (Cagle & Baucus, 2006). Conducting a pre-test and post-test of ethical perceptions using a survey adapted from Froelich and Kottke (1991) and Cole and Smith (1995) assessed the impact of this pedagogy. The results of the study support the use of the case study method in ethics education. Controlling for age, gender and academic rank, the results indicated that the students ethical values were strengthened by the case study experience. The results also indicated that that both the undergraduate and graduate female participants scored significantly higher on the pre-test than the male counterparts but the differences were not significant on the post-test. In addition, there was little difference between the results for the undergraduates and graduate students and in age (Cagle & Baucus, 2006). Abdolmohammadi and Reeves (2000) conducted a longitudinal study of business students over a four-year period. The educational intervention used during the study was a single-semester upper-level ethics course called Corporate Social Responsibility. The first part of the course covered a variety of ethical theories including Kohlberg s six-stage model, Aristotelian and Biblical virtues and focused on human rights issues in the workplace. The remainder of the course followed a case method approach. The DIT was administered at the beginning of the semester as a pre-test and again at the completion of the course as a post-test. The study used P-score of the DIT to determine changes of ethical cognition of these students over the length of the study. The DIT was also administered as a pre-test to 273 freshmen and as post-test four years later upon their graduation (only 42 of these individuals actually responded to the final test). The results of the single-semester study showed a moderate but significant increase among males but an insignificant increase among females. The females tested significantly higher than the males on the pre-test. The results of the four-year study found that there was a low gain for the female students and only a moderate gain for male students in the P- score over the four-year period. Based on these finding, a single-semester business ethics course

does impact ethical reasoning of business students but found that additional evidence was needed in the four-year study (Abdolmohammadi & Reeves, 2000). CONTRIBUTION TO LITERATURE Ethics interventions in accounting degree programs typically are based on one of two approaches; either a single course approach known as the discrete method where ethical issues are addressed in a separate required or optional course or the pervasive method in which ethical issues are integrated into several accounting courses (Dellaportas, 2006). In the discrete method approach, interventions can be part of an existing course, such as auditing, or a more effective method where the entire context of the course is on ethical issues. Even when single course educational interventions result in a significant positive result, follow-up studies have shown these results to be transitory with post-test results reverting to pre-test levels (Dellaportas, 2006; LaGrone, Welton & Davis, 1996). RATIONALE FOR STUDY The importance and need to study and improve the ethical awareness of undergraduate accounting students who will become future accountants has been addressed. It is imperative that these students are prepared to face the ethical dilemmas of the real world. This study is unique in that it will provide a third method of education intervention by combining the singlesemester discrete intervention along with the pervasive method. The questions addressed in this study are not whether ethics should be taught but whether multiple interventions over more than one semester will result in accounting students reasoning more ethically. Therefore, the purpose of this study is to determine the effect on students moral reasoning and development from interventions based on both the discrete and the pervasive method of accounting ethics education. This study focuses on the moral reasoning process. The DIT and the AEDI are used to gather data and measure the moral reasoning process. The DIT, one of the most widely used and validated instruments to measure moral reasoning, has been used in over 1000 peer-reviewed studies since 1979 (Rest & Narvaez, 1994; Pennino, 2002; Cruz, 2003; Wimalasiri, 2004). The DIT, a simple questionnaire, presents moral and ethical dilemmas in a story format. The DIT presents six moral dilemmas with three courses of action and followed by twelve statements with possible considerations in resolving the dilemma. The participants then rate each statement in terms of relevance to the dilemma. A Likert-Type scale using five points ranging from great importance to no importance is used. The final step is for the participants to rank the four most relevant statements (Wimalasiri, 2004). An additional advantage of the DIT is that the questions are not open-ended and can be scored by computer. The DIT instruments are acquired from the Center for the Study of Ethical Development at the University of Minnesota. The Center also provides a scoring service. Even though the DIT may not purport to provide an exact measure of moral reasoning, it is considered reliable for a variety of studies including education interventions in moral reasoning (Venezia, 2005; Thoma, Barnett, Rest & Narvaez, 1999). While the DIT measures general moral reasoning as applied to hypothetical ethical dilemmas, accounting specific instruments such as the AEDI measures prescriptive and deliberative reasoning as applied to the resolution of realistic ethical dilemmas. Thorne (2000) developed the AEDI using the DIT as a prototype for the design, the structure and for the ethical dilemmas that were representative of the accounting context. The validity and reliability of the

AEDI were comparable to the DIT; as well as the limitations that derive from the use of preselected cases and items that may not be representative of the moral reasoning process of all subjects (Thorne, 2000). Students at a small private four-year Christian college received ethics interventions such as case studies, role-playing, research papers, testing over standards and codes of conduct and community service. The discrete course called Ethics and Leadership is required of all junior and senior accounting and business majors. All other accounting and business courses have an ethics component and all faculty of the business school have agreed to participate in the study. This study extends prior research by combining the discrete and pervasive method, by including ethics interventions in each of the more than 20 business classes per semester and by focusing on both accounting context-specific and general moral reasoning. A demographic survey, the DIT-2 and the AEDI were presented to accounting students in specified courses during the first week of the fall 2007 semester. This quantitative study followed the pre-test/post-test methodology. All participating students were again administered the DIT-2 and AEDI subsequent to ethical interventions during the spring, 2008 semester. The demographic survey included information such as age, gender, academic rank, religious affiliation and religious attendance. Faculty assisting with the study were trained and closely supervised so that instructions and instrument administration were consistent. The interventions were presented to the students throughout the fall, 2007 and the spring 2008 semester. Each faculty facilitator was trained and supervised to provide consistency in the moral reasoning and ethical decision intervention. The interventions consisted of an overview of Kohlberg s work, presentation of ethical case studies, followed by group discussion about relevant ethical issues involved in each case and a written essay to support the student s rationale for their choice of action. Finally, the students completed 10 hours of community service in accounting, such as volunteer tax preparation or with a charitable or government organization as part of the accounting internship class requirement. SUMMARY In order to study the effects of educational interventions on moral and ethical reasoning, a review of literature was conducted. This review began with an introduction to the concerns generated by recent, high profile lapses of moral and ethical reasoning. A description of the moral development process was presented primarily based on the research of Lawrence Kohlberg and James Rest. Since this study is conducted in a college setting, various literature reviews using one-semester courses focused on ethics intervention to determine whether or not there was a significant increase in moral reasoning. Some longitudinal studies have used interventions in one course or a number of interventions outside of class. This study will be unique in that in addition to a discrete course in ethics, various interventions will be included in all business classes and the study will focus primarily on accounting students. In addition, the focus will be on both general moral reasoning and accounting context-specific moral reasoning with variables including gender, age and level of education and religious affiliation and religious attendance. RESEARCH DESIGN Cooper and Schindler (2006) explain that an exploratory study is one that helps uncover ideas that can or will be explored further in depth in future research studies. The present study, an exploratory study, was designed to investigate whether or not a blended intervention resulted in cognitive moral development.

The research involved a small sample of students in a pretest posttest structure. Five hypotheses were tested to determine whether or not there were changes or differences in cognitive moral development as measured by the AEDI and DIT instruments. Hypothesis 1: The change in cognitive moral development, as measured by the AEDI, for men and women will be the same. As stated above, gender differences in ethical decision making have been the focus of numerous empirical studies and the results have been inconclusive (Cruz, 2003). This hypothesis is designed to explore whether or not a blended intervention also results in inconclusive findings. Hypothesis 2: The change in cognitive moral development, as measured by the DIT-2, for men and women will be the same. Hypotheses 1 and 2 are designed for the same purpose but also to see whether or not the two instruments are consistent. Hypothesis 3: The change in cognitive moral development, as measured by the AEDI, for freshmen participants will be the same as for junior and senior participants. Studies relating age and cognitive moral development are also inconsistent in their findings. This hypothesis is designed to see if there is anything different about a blended intervention. Hypothesis 4: The change in cognitive moral development, as measured by the DIT-2, for freshmen participants will be the same as for junior and senior participants. Hypotheses 3 and 4 are designed for the same purpose but also to see whether or not the two instruments are consistent. Hypothesis 5: The ending scores for the freshman and sophomore students, as measured by the AEDI and DIT-2 score, will be the same as the beginning score for junior and senior students. This hypothesis is designed to explore whether or not the interventions given to the freshmen moved them ahead of the juniors and seniors who had no prior intentional ethics interventions. To test the hypotheses, a group of freshmen, all accounting majors, completed the AEDI, DIT-2 and a demographic survey early in the fall semester of 2007. The AEDI and DIT-2 were administered to the same group late in the spring semester of 2008. Various interventions occurred between the two banks of tests. Another group, made up of juniors and seniors, all accounting majors, was tested in the same manner as the freshmen and also received a number of interventions between the two banks of tests. This group of students had already received a number of interventions during their earlier years in college. Included in the earlier interventions was an ethics and leadership course. Interventions for both groups consisted of an overview of Kohlberg s work, presentation of ethical case studies, followed by group discussion about the relevant ethical issues, and a written essay to support the student s rationale for his or her choice of action. In addition, the group made up of juniors and seniors completed ten hours of community service in accounting as part of the required Internship in Accounting course. RESULTS STUDY PARTICIPANTS The study participants consisted of 50 undergraduate accounting students. Of this group, one of the students left the college during the fall semester and six students were purged because their DIT-2 answers did not conform to the established reliability tests. The reliability checks include excess response to meaningless items, inconsistency in rate and rank of items, and

missing data. Of the remaining 43 students, 28 were beginning accounting majors and 15 were junior and senior accounting majors (see Table1 below). In order to avoid the appearance of coercion, the packets were distributed by business faculty other than the researcher and extra credit was given to each student in the selected class whether they chose to participate in the study or not. The beginning accounting students were in the Principles of Accounting I in the fall semester and Principles of Accounting II in the spring semester. The upper level accounting students were in Cost Accounting I class or Governmental and Nonprofit Accounting in the fall semester and Cost Accounting II or Advanced Accounting in the spring semester. Table 1 Demographics by Gender and Classification Male Female Total Freshman/Sophomore 15 13 28 Junior/ Senior 7 8 15 Total 22 21 43 DATA COLLECTIONS The DIT-2, the AEDI, and demographic survey were presented to the students as part of the initial packet during the beginning of the fall semester in August of 2007. The final packet administered in March 2008 contained the DIT-2 and the AEDI. Each packet is identified by a unique five-digit identification number as required by the DIT-2. Hypothesis 1 The results support hypothesis one which states the change in cognitive moral development, as measured by the AEDI, for men and women will be the same. In comparing the post-test scores of both the male and female students, the mean for the AEDI was higher for the male students. Using the independent sample t-test (table 2), the differences in means were not significant at.45.

Table 2 Independent Samples T-Test of AEDI Post-Test of Male and Female Students Group Statistics AEDI Post-test Mean Number Std. Dev. male 44.09 22 6.47 female 42.67 21 5.77 Independent Samples Test f 0.035 Significance 0.853 t 0.760 df 41 Significance 0.450 Hypothesis 2 The results support hypothesis 2 which states the change in cognitive moral development, as measured by the DIT-2, for men and women will be the same. In comparing the post-test scores of both the male and female students (table 3), the mean for the DIT-2 p-score was higher for the female students. Using the independent sample t-test, the differences in means were not significant with.57 for the DIT-2 p-score. Previous studies have had mixed results in gender differences with females students typically having significantly higher general moral reasoning scores. Table 3 Independent Samples T-Test of DIT-2 P-Scores of Male and Female Students Group Statistics DIT-2 Post-test Mean Number Std. Dev. male 27.27 22 13.16 female 29.38 21 10.58 Independent Samples Test f 0.904 Significance 0.347 t -0.577 df 41 Significance 0.567

Hypothesis 3 The results support hypothesis 3, which states the change in cognitive moral development, as measured by the AEDI, for freshmen participants will be the same as for junior and senior participants. Table 4 shows the pretest results of the T-Test for Independent samples using the AEDI post-test. The test revealed no significant difference in score with a significance value of.997. Table 4 Independent Samples T-Test of AEDI of the Post-test Group Statistics AEDI Post-test Mean Number Std. Dev. Lower class 43.39 28 6.75 Upper class 43.40 15 4.91 Independent Samples Test f 2.848 Significance 0.099 t -0.004 df 41 Significance 0.499 Hypothesis 4 The results support hypothesis 3, which states the change in cognitive moral development, as measured by the DIT-2, for freshmen participants will be the same as for junior and senior participants. Table 5 shows the post-test results of the T-Test for Independent samples using the P-score of the DIT-2. The test revealed no significant difference in score with a significance value of.25. The result of hypotheses 3 and 4 implies moral reasoning scores are not significantly impacted by age or student classification. Similar results were found by the Roger and Smith (2001) study that revealed ethical testing of university students generally finds limited or no evidence in age differences.

Table 5 Independent Samples T-Test of DIT-2 P-Score of the Post-test Group Statistics DIT-2 Post-test Mean Number Std. Dev. Lower class 29.86 28 11.80 Upper class 25.4 15 11.86 Independent Samples Test f 0.128 Significance 0.723 t 1.179 df 41 Significance 0.123 Hypothesis 5 The results do not support hypothesis 5, which states the ending scores for the freshman and sophomore students, as measured by the AEDI and DIT-2 score, will be the same as the beginning score for junior and senior students. The post test for the lower level students was significantly higher than the pre-test of the upper level students on both the AEDI and the DIT-2. The AEDI (table 6) had a difference in mean of 7.12 with a significance of.005. The DIT-2 (table 7) P-score had a difference in mean of 6.75 with a significance of less than.05. This result indicates that ethical interventions may have a significant impact on college students moral reasoning ability. Table 6 Independent Samples T-Test of AEDI Group Statistics AEDI Mean Number Std. Dev. Lower class Post test 43.39 28 6.75 Upper class Pre-test 36.27 15 5.50 Independent Samples Test F 1.342 Significance 0.253 T 3.507 Df 41 Significance 0.005 Table 7 Independent Samples T-Test of DIT-2 P-Score Group Statistics DIT -2 P-Score Mean Number Std. Dev.

Lower class Post test 29.86 28 11.8 Upper class Pre-test 23.11 15 13.7 Independent Samples Test F 0.216 Significance 0.645 t 1.689 df 41 Significance 0.0499 DISCUSSION In comparing studies in gender differences, the results of this study differed from the Shawver et al (2006) study in that this study found no significant difference in moral reasoning scores of male and female students. The results of this study did agree with the Izraeli and Jaffe (2000) study and the Smith and Oakley (1997) study that found no significant differences in ethical perceptions or behavior between men and women. The results on age and classification (hypotheses 3 and 4) were similar to the Roger and Smith (2001) study that found little or no evidence of age differences of moral reasoning scores for university students. This study differed from the Emerson et al (2007) study and from the 1998 meta-analysis by Borkowski and Ugras, which reported 13 of 15 studies where older students responded more ethically than younger students. Hypothesis 5 revealed that younger students with ethical interventions may have a higher ethical awareness than older students without ethical interventions. In reviewing studies on ethical educational interventions and in comparing the results of this study to each study reviewed, Earley and Kelly (2004) study found similar results in the accounting context-specific moral reasoning. The results differed in general moral reasoning, Earley and Kelley (2004) found no significant difference between pretest and post-test results of the DIT P-score. Finally, in comparing this study to the four year study conducted by Abdolmohammadi and Reeves (2000), this study found significant improvement in moral reasoning scores over a two semester period and utilized multiple ethical educational interventions. Abdolmohammadi and Reeves (2000) utilized only a single discrete course during the four year period and did not find significant improvement in moral reasoning scores. The concern of the improvements being transitory may be reduced by reinforcing ethical values throughout the educational process and may aid in the student s retention of those values. With that retention, once the student graduates and enters the workforce as an accountant, ethical behavior could be as natural a response as journalizing debits and credits. By having both the discrete course and the interventions embedded in all of the business and accounting classes, the students are exposed to a variety of viewpoints and methods of intervention. This approach allows the student, no matter their learning style, to have an opportunity to learn and integrate ethical values. Future research could extend the study to follow the student as a beginning freshman through the senior year, graduate school or even to the first years of employment. Future studies could also compare moral reasoning as measured by the DIT-2 and AEDI to actual behavioral

responses of practicing accountants. This type of longitudinal study could reveal whether the results are transitory and whether ethical responses reflect ethical behavior. A comparison of interventions could also be done to see what type of ethical educational study has the most impact on moral development.

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