ACC5163 Chapter 2 Notes

The four components of Rest's model are processes that MUST take place for moral behavior to occur. Rest does NOT offer the framework as a linear decision-making model, suggesting instead that the components interact through a complicated sequence of ____ AND ____. An individual who demonstrates adequacy in one component may not necessarily be adequate in another, and moral failure can occur when there is a deficiency in any one component. For example, an individual who has good moral reasoning capacity, a skill that can be developed (Component 2), may fail to perceive an ethical problem because she does not clearly understand how others might feel or react—a lack of empathy (Component 1).

"feed-back" and "feed-forward" loops

*NEED TO READ ABOUT ACE MANUFACTURING FOR CLASS*

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6. ___. Consider which ethical principle is most relevant and useful to this specific issue. Is it utilitarianism? Kant's categorical imperative? Justice as fairness? Or, is it a combination of perspectives?

Apply the ethical standards and perspectives

Libby and Thorne surveyed members of the Canadian accounting community with the help of the ____, the equivalent of the AICPA in the United States, to develop a set of virtues important in the practice of auditing. The authors divided the virtues into two categories: intellectual virtues, which __; and instrumental virtues, which _____. The most important intellectual virtues were found to be (7)

Canadian Institute of Chartered Accountants (CICA) indirectly influence an individual's intentions to exercise professional judgment directly influence an individual's actions. integrity, truthfulness, independence, objectivity, dependability, being principled, and healthy skepticism.

Kohlberg's justice orientation has been criticized by ___, a noted psychologist and educator. Gilligan claims that because the stages were derived exclusively from interviews with boys, the stages reflect a decidedly male orientation and they ignore the ______ orientation that characterizes female moral judgment. For males, advanced moral thought revolves around(3).. The ideal is ___, in which all parties evaluate one another's claims in an impartial manner. But this conception of morality, Gilligan argues, fails to capture the distinctly female voice on moral matters.

Carol Gilligan care-and-response rules, rights, and abstract principles formal justice

___ refers to the thought process followed in one's moral development. An individual's ability to make reasoned judgments about moral matters ____. The psychologist Lawrence Kohlberg concluded, on the basis of 20 years of research, that people develop from childhood to adulthood through a sequential and hierarchical series of cognitive stages that characterize the way ____. Moral reasoning processes become more complex and sophisticated with development. Higher stages rely upon cognitive operations that are not available to individuals at lower stages, and higher stages are thought to be "morally better" because they are ___. Kohlberg's views on ethical development are helpful in understanding how individuals may ____ and, as they become more sophisticated in their use, apply them more _____.

Cognitive development develops in stages. they think about ethical dilemmas. consistent with philosophical theories of justice and rights internalize moral standards critically to resolve ethical conflicts.

2.____. Kidder distinguishes between __ and __. Because we are members of larger communities, we are involved in any ethical issue that arises in the group. Yet we are only responsible for dealing with problems that we can __. For example, I may be concerned that clients threaten to fire their auditors if they plan to give a negative opinion on the financial statements. However, there is little I can do about it unless it happens in my firm.

Determine the actor involvement responsibility do something about

Gentile identifies the most frequent categories of argument or rationalization that we face when we speak out against unethical practice. Some of the most common arguments include: ____: "Everyone does this, so it's really standard practice. It's even expected." ___: "The impact of this action is not material. It doesn't really hurt anyone." _____: "This is not my responsibility; I'm just following orders here." ____: "I know this isn't quite fair to the customer, but I don't want to hurt my reports/team/boss/company." An additional argument we include is: _____: "This is a one-time request; you won't be asked to do it again."

Expected or Standard Practice Materiality Locus of Responsibility Locus of Loyalty Isolated Incident

Ethical decisions are not made in a vacuum. Pressures exist in the real world of business and accounting; cultures may support or work against ethical behavior; and individuals react differently to the reasons and rationalizations given for not taking the ethical path. Therefore, it is important to understand how best to make your case when faced with an ethical dilemma. As we have learned, knowing what to do is not the same as doing it. We need a way to overcome obstacles and deal with those who would distract us from our goal to be the best person we can be; to make the ethical choice; and to follow through with ethical action. This is where the _____ is most valuable.

GVV framework

3. ____ (3) information is important for making effective decisions of all kinds, including ethical ones. Consider the motives of affected __, ____ of behavior, likely __ if the problem persists, and likely _____ of one course of action or another.

Gather the relevant facts. Adequate, accurate, and current parties patterns consequences outcomes

Integrated Ethical Decision-Making Process

Identify the ethical and professional issues (ethical sensitivity). Identify and evaluate alternative courses of action (ethical judgment). Reflect on the moral intensity of the situation and virtues that enable ethical action to occur (ethical intent). Take action (ethical behavior).

Stage 6: An example of such a principle is ____, the first formulation of which can be stated as: "Act only according to that maxim [reason for acting] by which you can at the same time will that it would become a universal law." Kant's categorical imperative creates an absolute, unconditional requirement that exerts its authority in all circumstances, and is both required and justified as an end in itself. Example: Susan would go beyond the norms, laws, and authority of groups or individuals. She would disregard pressure from her supervisor or the perceived best interests of the company when deciding what to do. Her action would be guided only by universal ethical principles that would apply to others in a similar situation.

Immanuel Kant's categorical imperative

Decision-making guidelines can help us make better ethical choices. ___ points out that taking a systematic approach encourages teams and individuals to carefully define the problem, gather information, apply ethical standards and values, identify and evaluate alternative courses of action, and follow through on their choices. They are also better equipped to ___ their decisions.

Johnson defend

Stage 4: _____ Stage 4 behavior emphasizes the morality of law and duty to the social order. One's (3) become the focus of decision making. Example: Susan might refuse to make the illegal payment, even though it leads to a loss of jobs in her company (or maybe even the closing of the company itself), because she views it as her duty to do so in the best interests of society. She does not want to violate the law

Law and Order duty to society, respect for authority, and maintaining the social order

7. ____. Compromise is one way to reveal a new alternative that will resolve the problem or to develop a creative solution. A third way can also be the product of ____. One's conception of the moral and ethical issues can change when considering different perspectives from a moral point of view. We may discover a better, economically viable, and morally justifiable solution.

Look for a third way moral imagination.

8. ____. At some point we have to make the decision. However, we may be mentally exhausted from wrestling with the problem, get caught up in analysis paralysis, or lack the necessary courage to come to a decision.

Make the decision

THREE SAMPLE RESPONSES TO THE HEINZ DILEMMA A: It really depends on how much Heinz likes his wife and how much risk there is in taking the drug. If he can get the drug in no other way and if he really likes his wife, he'll have to steal it. B: I think that a husband would care so much for his wife that he couldn't just sit around and let her die. He wouldn't be stealing for his own profit; he'd be doing it to help someone he loves. C: Regardless of his personal feelings, Heinz has to realize that the druggist is protected by the law. Since no one is above the law, Heinz shouldn't steal it. If we allowed Heinz to steal, then all society would be in danger of anarchy.

PRE CON POST

Level 3—Postconventional _____ underlies decision making at this level. The individual recognizes that there must be a ___. There is an orientation to principles that shape whatever laws and role systems a society may have.

Principled morality societywide basis for cooperation

Kohlberg's work is not without its critics. Some philosophers complain it draws too heavily from ____ and makes ___ ethics superior to other ethical perspectives. They note that the theory applies more to ___ than to ___. A number of psychologists have challenged the notion that people go through "rigid" stages of moral reasoning, arguing instead that they can engage in ___, regardless of ___.

Rawls's Theory of Justice deontological societal issues individual ethical decisions. many ways of thinking about a problem, age.

1. ____. Similar to Rest's notion of ethical sensitivity, we must acknowledge that an issue deserves our attention and moral questions exist.

Recognize that there is a moral issue

The integrated model explained below draws on ___ and ____ to provide a basis for ethical decision making when accounting issues create ethical dilemmas. Consideration is given to moral intensity and how intellectual instrumental virtues enable ethical action to occur.

Rest's Model and Kidder's Checkpoints

9. ____. Return to the decision later, after the issue has been resolved, to debrief. Reflect on the lessons to be learned. How can you apply them to future decisions? What ethical issues did it raise?

Revisit and reflect on the decision

Stage 2: _______ In Stage 2, rules and authority are important only if acting in accordance with them satisfies one's own needs (____). Example: Here, Susan might make the payment even though it is against company rules if she perceives that such payments are a necessary part of doing business. She views the payment as essential to gain the contract. Susan may believe that competitors are willing to make payments, and that making such payments are part of the culture of the host country. She concludes that if she does not make the payment, it might jeopardize her ability to move up the ladder within the organization and possibly forgo personal rewards of salary increases, bonuses, or both. Because everything is relative, each person is free to pursue her individual interests.

Satisfying One's Own Needs egoism

Stage 5: ____ In Stage 5, an individual is motivated by upholding the basic (3) of society. That person recognizes in some cases that ___ and ___ points of view may conflict. To reduce such conflict, individuals at this stage base their decisions on a ____. Example: Susan might weigh the alternative courses of action by evaluating how each of the groups is affected by her decision to make the payment. For instance, the company might benefit by gaining the contract. Susan might even be rewarded for her action. The employees are more secure in their jobs. The customer in the other country gets what it wants. On the other hand, the company will be in violation of the Foreign Corrupt Practices Act (FCPA), which prohibits (bribery) payments to foreign government officials. Susan then weighs the consequences of making an illegal payment, including any resulting penalties, against the ability to gain additional business. Susan might conclude that the harms of prosecution, fines, other sanctions, and the loss of one's reputational capital are greater than the benefits..

Social Contract rights, values, and legal contracts legal and moral rational calculation of benefits and harms to society

5. ___. If an issue does not involve wrong behavior, then it likely pits two important positive values against each other. Kidder identified four such models: ____ to others and institutions;_____; ______; and ___. When an ethical dilemma pits two core values against each other, a determination should be made whether they are in conflict with one another in this situation.

Test for right-versus-right paradigms truth-telling versus loyalty personal needs versus needs of the community short-term benefits versus long-term negative consequences justice versus mercy

4. ____. Kidder suggests using four determinations including a ____ If lawbreaking is involved (i.e., fraudulent financial statements), then the problem becomes a legal matter, not a moral one. The ____ relies on intuition. If you have an uneasy feeling about the decision or course of action, chances are it involves right-versus-wrong issues. The ____ test asks how you would feel if your decision made it to the front page of the local newspaper. If you feel uncomfortable about it, then you should consider choosing another alternative. The ____ asks how you would feel if your mother or some other important role model became aware of your choice. If you have a queasy feeling, then it is best to reconsider your choice

Test for right-versus-wrong issues legal test. smell test front-page mom test

The lack of research on the characteristics of a moral issue prompted ____ to develop the moral intensity model. He argued that the characteristics of the moral issue—what he collectively termed ___—influence ____. Jones's model links moral intensity to _____.

Thomas Jones moral intensity ethical decision making. Rest's Four-Component Model.

Dealing with moral issues can be perplexing. How, exactly, should we think through an ethical issue? What questions should we ask? What factors should we consider? The philosophical methods of moral reasoning suggest that once we have ascertained the facts, we should ask ourselves five questions when trying to resolve a moral issue: (just read)

What benefits and what harms will each course of action produce, and which alternative will lead to the best overall consequences? What moral rights do the affected parties have, and which course of action best respects those rights? Which course of action treats everyone the same, except where there is a morally justifiable reason not to, and does not show favoritism or discrimination? Which course of action advances the common good? Which course of action develops moral virtues?

Behavioral ethics looks at how human beings actually behave in moral contexts and describes the ____, how _________ influence it, and ways in which decisions can be nudged in a more ethical direction through ___. This approach to ethics requires understanding and explaining moral and immoral behavior in _____ ways. It requires understanding the __ and ____ of both__ and ___. Finally, it requires identifying levers at both the ___ and ____ to change ethically questionable behaviors when individuals are acting in unethical ways that they would not endorse with greater reflection.

actual behavior of people situational and social forces simple interventions systematic antecedents and consequences ethical and unethical actions individual and the institutional level

The field of behavioral ethics emphasizes the need to consider how individuals ___, rather than ____. Research in behavioral ethics reveals that our minds have two distinct modes of decision making— __ and ____. Daniel Kahneman, the Nobel Prize-winning behavioral economist, points out that System 1 thinking is our____: fast, automatic, effortless, and emotional decision processes; on the other hand, System 2 thinking is ______. For example, System 1 thinking is detecting that one object is more distant than another, while an example of System 2 thinking is parking in a narrow space.5

actually make decisions how they would make decisions in an ideal world "System 1" and "System 2" thinking. intuitive system of processing information: slower, conscious, effortful, explicit, and a more reasoned decision process.

Social Consensus refers to the degree of ____. This social group could be society as a whole (e.g., a fraudulent financial statement is not morally accepted by society because accounting rules and SEC laws prohibit it). A strong Social Consensus that an act is morally wrong increases moral intensity. Proximity refers to the __ by the consequences. An increase in proximity results in an increase of moral intensity. An auditor who becomes too close to a client and is dealing with fraudulent financial statements is likely to feel more pressure from the client because of their close relationship.

agreement among a social group that an action is good or bad nearness of the decision maker to the individuals potentially affected

According to Mary Gentile who developed the GVV methodology, "It shifts the focus away from _____ by addressing a series of questions for protagonists after identifying the right thing to do," including: (4) GVV relies on developing __ and ____, and rehearsing how to voice/enact not just any values, but ___

awareness and analysis to action How can you get it done effectively and efficiently? What do you need to say, to whom, and in what sequence? What will the objections or pushback be and, then, what will you say next? What data and examples do you need to support your point of view? arguments and action plans moral values

Kahneman's fundamental proposition is that we identify with System 2, "the conscious, reasoning self that has ___, makes __ and decides __ and ____." But the one that is really in charge is System 1 as it "effortlessly originates __ and ___ that are the main sources of the __ and ____.."

beliefs choices what to think about and what to do impressions and feelings explicit beliefs and deliberate choices of System 2

The link between Social Consensus and ethical decision making makes sense in accounting because it is a ___________ for ethical actions. On the other hand, if the CPA firm has a culture of placing the client's interests ahead of the public interest, then intensity increases and moral action may not occur.

community with shared values and beliefs and expectations

We intend the model to be used as a framework to guide ethical analysis by students and frame the debate in the classroom when ethical dilemmas are discussed. It is not necessary to ___ of the model in every case. Instead, it should serve as a _____ to students of some of the most important points to consider when making ethical decisions.

consider every element reminder

One limitation of the philosophical reasoning approaches incorporated into decision-making models is that how we think we should behave is different from how we ___. This creates a problem of ____, a term first coined by _____. The inconsistency between our thoughts, beliefs, or attitudes and our behavior creates the need to resolve contradictory or conflicting beliefs, values, and perceptions.

decide to behave cognitive dissonance Leon Festinger in 1956.

Kohlberg's model suggests that people continue to change their ____ over time and with additional education and experience. They may experience a change in values and ethical behavior. In the context of business, an individual's moral development can be influenced by ___, especially ___. Ethics training and education have been shown to improve _____. Kohlberg maintains that his stage sequence is __; it is the same in all cultures.

decision priorities corporate culture, especially ethics training managers' moral development. universal

The most important instrumental virtues were (7). The authors concluded from their study that virtue plays an integral role in both the ___ to exercise professional judgment and the ____, and the necessity of possessing both intellectual and instrumental virtues for auditors.

diligence (i.e., due care) and being alert, careful, resourceful, consultative, persistence, and courageous intention exercise of professional judgment,

Ethicist Rushworth Kidder acknowledges that ethical issues can be "___ and sometimes downright ___." They can arise suddenly, create complex issues, and have unexpected consequences. However, Kidder argues that there is an underlying structure to the ethical decision-making process. Kidder suggests that nine steps or checkpoints can help bring __ to otherwise confusing ethical issues. What follows is a brief summary of the major points.

disorderly confusing order

Kohlberg's theory of ethical development provides a framework that can be used to consider the ____ in accounting. For example, if an individual accountant is influenced by the firm's desire to "make the client happy," then the result may be reasoning at ___. The results of published studies during the 1990s by accounting researchers indicate that CPAs reason primarily at __ and ___

effects of conflict areas on ethical reasoning Stage 3 Stages 3 and 4

One question that arises from Rest's model is how to align ___ with _____

ethical behavior with ethical intent.

GVV links to ___ and ___ in ____. An ethical decision maker should start by ___. The intent is there, but it may fall short of the mark of taking ethical action unless a ____. It is the pathway that GVV addresses. GVV is used ___; that is, you have already decided what to do and have chosen to voice your values.

ethical intent and ethical action in Rest's Model pathway can be found to express one's values in the workplace committing to expressing her values in the workplace post-decision making

Gilligan believes that women need more information before answering the question: Should Heinz steal the drug? Females look for ways of resolving the dilemma where no one—Heinz, his wife, or the druggist—will ____. Gilligan sees the hesitation to judge as a ___, an aversion to cruel situations where someone will get hurt. However, much about her theories has been challenged in the literature. For example, Kohlberg considered it a sign of __, a waffling that results from trying to please everyone (Stage 3). Moreover, Gilligan's beliefs seem to imply that men lack a caring response when compared to females. Rest argues that Gilligan has ___ found on Kohlberg's scale.

experience pain. laudable quest for nonviolence ethical relativism exaggerated the extent of the sex differences

Magnitude of Consequences refers to the degree to which an individual may be_____. A greater degree of harm or benefit results in an increase in moral intensity. Temporal Immediacy refers to the ___. An action with immediate negative consequences will cause a greater increase in moral intensity than an action for which the consequences are delayed.

harmed or benefited by the decision maker's action length of time between the action and its consequences

Within the cognitive-developmental paradigm the most distinguishing characteristic of morality is the ______. ___ has long been regarded as the single most influential factor—and the only truly moral determinant—of a person's moral behavior. By definition, morality requires that a person's actions be (3). Kohlberg maintained that it is as a result of ____ that one becomes truly a moral person, in both __ and ___

human capacity to reason. Moral judgment rational, motivated by purpose or intent, and carried out with autonomous free will development in moral reasoning mind and deed

Level 2—Conventional At the conventional level, the individual becomes aware of the ____ and one's duty to society. ____ becomes an important consideration in decision making. Stage 3: ____ In Stage 3, an individual is not only motivated by rules but seeks to do what is in the perceived best interests of others, especially those in a (3). There is a commitment to ___ in the relationship. Example: Susan wants to be liked by others. She might be reluctant to make the payment but agrees to do so, not because it benefits her interests, but in response to the pressure imposed by her supervisor, who claims that the company will lose a major contract and employees will be fired if she refuses to go along.

interests of others Personal responsibility Fairness to Others family, peer group, or work organization loyalty

The first step in moral behavior requires that the individual ___. Absent the ability to recognize that one's actions affect the welfare of others, it would be virtually impossible to make the most ethical decision when faced with a moral dilemma.

interpret the situation as moral

Individuals do not always behave in accordance with their ethical intention. An individual's intention to act ethically and her ethical actions may not be aligned because of a ______. Individuals with strong ethical character will be more likely to carry out their ethical intentions with ethical action than individuals with a weak ethical character because they are ____ (i.e., have courage and maintain integrity to do otherwise). Once a moral person has considered the ethics of the alternatives, she must construct an appropriate plan of action, avoid distractions, and maintain the courage to continue.

lack of ethical character better able to withstand any pressures

Identify and evaluate alternative courses of action (ethical judgment). What ___ issues exist? What ___ in resolving the conflict under professional standards? Which ___ apply to help reason through alternatives (i.e., rights theory, utilitarianism, justice, and virtue)?

legal can and cannot be done ethical reasoning methods

Probability of Effect refers to the ____. Moral intensity increases with an action that has a high probability of occurrence and high likelihood of causing predicted harm. Pressures increase on auditors when harm to the public interest intensifies with the likelihood of fraudulent financial statements. Concentration of Effect refers to the relationship between the ___ and _____. Moral intensity increases if the Concentration of Effect is great. Fraudulent financial statements issued by a publicly owned company that is also using the statements for a significant loan creates additional pressures on auditors to make the most ethical decision possible

likelihood that the predicted consequences and the expected level of harm/benefit will occur number of people affected and the magnitude of harm

Reflect on the moral intensity of the situation and virtues that enable ethical action to occur (ethical intent). Evaluate the __ of the consequences if specific actions are taken; ___ of those consequences; ability to effect ethical responses by one's actions; consensus view within the profession about the __ of the intended actions. Consider whether anyone's ___ are at stake and how they manifest in the decision-making process Consider how __ (i.e., intellectual virtues) motivates ethical actions.

magnitude likelihood appropriateness rights virtue

Our contention is there is an important link between moral intensity and ethical decision making. As individuals face morally intense situations, their awareness of the moral dilemma, their judgments about choices and consequences, and their intention to act are significantly affected by specific characteristics of the moral situation. One study found that Social Consensus is significantly associated with ____, ___, and _____. As subjects in the study recognized a moral issue, formed a judgment, and decided on their intention to act, they were strongly affected by what they believed others within their social group considered morally right or wrong.

moral awareness, judgment, and intention.

Should the husband have done that? Was it right or wrong? Most people say that Heinz's theft was ____, but Kohlberg was less concerned about whether they approved or disapproved than with the __ they gave for their answers. Kohlberg monitored the reasons for judgments given by a group of __ boys ranging in age from 10 to 16 years and isolated the six stages of moral thought. The boys progressed in reasoning sequentially, with most never reaching the highest stages. He concluded that the ___ is the highest claim of morality.

morally justified reasons 75 universal principle of justice

At Stage 6, the auditor would ask whether she would want other auditors to insist on providing an allowance for the uncollectibles if they were involved in a similar situation. This creates an ___ for determining the right decision. The auditor reasons that the orderly functioning of markets and a level playing field require that financial information should be accurate and reliable, so another auditor should also decide that the allowance needs to be recorded. The application of ___ such as ___ and ____ enables her to carry out the ethical action and act in a responsible manner.

objective standard virtues objectivity and integrity

One possible implication of these results is that a larger percentage of CPAs may be overly influenced by their relationship with (3) (Stage 3) or by ___ (Stage 4). A CPA who is unable to apply the technical accounting standards and rules of conduct critically when these requirements are ___ is likely to be influenced by others in the decision-making process. If an auditor reasons at the postconventional level, then that person may refuse to give in to the pressure applied by the supervisor to overlook the client's failure to follow GAAP. This is the ethical position to take, although it may go against the culture of the firm to "___."

peers, superiors, and clients rules unclear go along to get along

An individual's ethical cognition of what "ideally" ought to be done to resolve an ethical dilemma is called ____. The outcome of one's prescriptive reasoning is his ETHICAL JUDGEMENT of the ideal solution to an ethical dilemma . Generally, an individual's prescriptive reasoning reflects his cognitive understanding of an ethical situation as measured by his ____. Once a person is aware of possible __ and how people would be ___ by the alternatives, a process aided by the philosophical reasoning methods, a judgment must be made about which course of action is more morally justifiable (which alternative is just or right).

prescriptive reasoning. level of moral development lines of action affected

Cognitive-developmental researchers have attempted to understand the ____. In particular, Rest asserts that ethical actions are not the outcome of a ___, but result from a _____. Rest's model of ethical action is based on the presumption that an individual's behavior is related to her ____. Rest built on Kohlberg's work by developing a ___. The four-component model describes the cognitive processes that individuals use in ethical decision making; that is, it depicts how an individual __ and then continues through to his ___ and finally finds courage to __. Each component of the model must be present before the moral action will be undertaken.

process of ethical decision making single, unitary decision process combination of various cognitive structures and psychological processes level of moral development four-component model of the ethical decision-making process first identifies an ethical dilemma intention behave ethically

Empirical studies have explored the underlying ethical reasoning processes of accountants and auditors in practice. Findings show that ethical reasoning may be an important determinant of ___, such as the disclosure of ___ and _____. Results also show that unethical and dysfunctional audit behavior, such as the _______, may be systematically related to the auditor's level of ethical reasoning. In reviewing these and other works, ___ and _____ conclude that the results imply that ethical reasoning may be an important cognitive characteristic that may affect individual judgment and behavior under a wide array of conditions and events in extant professional practice

professional judgment sensitive information and auditor independence underreporting of time on an audit budget Ponemon and Gabhart

Take action (ethical behavior). Decide on a course of action consistent with one's ___. How can ___ (i.e., instrumental virtue) support turning ethical intent into ethical action? What steps can I take to ___ my position and argument? How can I ___ that mitigate against taking ethical action? Who can I go to for ___?

professional obligations virtue strengthen counter reasons and rationalizations support

An auditor who reasons at Stage 5 would not want to violate the ____ embedded in the profession's ethical standards, which values the public trust above all else. Investors and creditors have a right to know about the uncertainty surrounding collectibility of the receivables.

public interest principle

Stage 6: Universal Ethical Principles Kohlberg was still working on Stage 6 at the time of his death in 1987. He believed that this stage ____ occurred. Still, a person at this stage believes that right and wrong are determined by universal ethical principles that everyone should follow. Stage 6 individuals believe that there are ____ rights, which are ___. These rights, laws, and social agreements are valid not because of a particular society's laws or customs, but because they rest on the ___. ___ and ____ are examples of principles that are deemed universal. If a law conflicts with an ethical principle, then an individual should act in accordance with the principle.

rarely inalienable universal in nature and consequence premise of universality Justice and equality

Level 1—Preconventional At the preconventional level, the individual is very __. Rules are seen as something ____. Stage 1: ___, _____. At this stage, what is right is judged by one's obedience to rules and authority. Example: A company forbids making payoffs to government or other officials to gain business. Susan, the company's contract negotiator, might justify refusing the request of a foreign government official to make a payment to gain a contract as being contrary to company rules, or Susan might make the payment if she believes there is little chance of being caught and punished.

self-centered external imposed on the self. Obedience to Rules; Avoidance of Punishment

In her examination of the model, Armstrong suggests that moral development comprises ___ to the moral content of a situation or dilemma and ___, or the ability to understand the issues, think them through, and arrive at an __. Similarly, virtue comprises ___, which describes an individual's willingness to place the interests of others ahead of her own interest; and ___, which leads to ____.

sensitivity prescriptive reasoning ethical judgment ethical motivation ethical character ethical behavior

Moral judgment relates to developing moral reasoning abilities over time. Kohlberg argued that individuals progress through a series of moral stages just as they do physical stages. Each stage is more advanced than the one before. People engage in more complex reasoning as they progress up the stages and become less self-centered and develop broader definitions of morality. Rest added that developing moral judgment is a ___ that progressed from a ___, through a ___, to a reliance on ___, and a primary factor in the understanding of moral actions and emotions.

social and cognitive construct self-focused view of moral issues group-based moral perspective postconventional moral principles

Identify the ethical and professional issues (ethical sensitivity). What are the ethical and professional issues in this case (i.e., GAAP and GAAS)? Who are the ____ (i.e., investors, creditors, employees, management, the organization)? Which___ apply (i.e., AICPA Code Principles, IMA Ethical Standards, and IFAC standards)?

stakeholders ethical/professional standards

After concluding what course of action is best, decision makers must be focused on ___ and ____ Moral values may conflict with other values. Moral motivation (FOCUS) reflects an individual's willingness to ____ (e.g., honesty, integrity, trustworthiness, caring, and empathy) ahead of ___ (e.g., wealth, power, and fame) that relate to self-interest. An individual's ethical motivation influences her __ to comply or not comply with her ethical judgment in the resolution of an ethical dilemma.

taking the moral action and follow through with ethical decision making. place ethical values nonethical values intention

The ethical domain for accountants and auditors usually involves four key constituent groups, including (1) _____ that hires and pays for accounting services; (2) ___ that employs the practitioner, typically represented by the collective interests of the firm's management; (3) ___, including various regulatory bodies such as the Securities and Exchange Commission (SEC) and the PCAOB; and (4) the ___, who rely on the attestations and representations of the practitioner and the firm. Responsibilities to each of these groups may ___. For example, fees are paid by the client organization rather than by the general public, including investors and creditors who are the direct beneficiary of the independent auditing services, so the public interest may conflict with client interests. These conflicts might influence the _____, thereby influencing their ethical reasoning.

the client organization the accounting firm the accounting profession general public conflict cognitive development of auditors

"Giving Voice to Values (GVV)" is a behavioral ethics approach that shifts the focus away from ____ to an emphasis on developing the capacity to ____ by finding the levers to effectively voice and enact one's values. The methodology asks the protagonist to think about the arguments others might make that create barriers to expressing one's values in the workplace and how best to counteract these "___ and ____"

traditional philosophical reasoning effectively express one's values in a way that positively influences others reasons and rationalizations.

The field of behavioral ethics holds great promise for helping students to better ___ and learn how to ___. Speaking up when things go wrong and voicing one's beliefs is something that takes practice, which is why we discussed the GVV methodology in this chapter. We follow through with additional discussions in the rest of the book.

understand their motivations for action speak up when wrongdoing exists

GVV provides a framework to deal with the opposing points of view based on the following series of questions. What are the main arguments you are trying to counter? That is, what are the reasons and rationalizations you need to address? What is at stake for the key parties, including those who disagree with you? What levers can you use to influence those who disagree with you? What is your most powerful and persuasive response to the reasons and rationalizations you need to address? To whom should the argument be made? When and in what context?

xx

In Europe, a woman was near death from a rare type of cancer. There was one drug that the doctors thought might save her. It was a form of radium that a druggist in the same town had recently discovered. The drug was expensive to make, but the druggist was charging 10 times what the drug cost Page 64 him to make: It cost $200 for the radium, and he charged $2,000 for a small dose of the drug. The sick woman's husband, Heinz, went to everyone he knew to borrow the money, but he could get together only about $1,000—half the cost. He told the druggist that his wife was dying and asked him to sell it cheaper or let him pay later. But the druggist said, "No, I discovered the drug and I'm going to make money from it." Heinz got desperate and broke into the man's store to steal the drug for his wife.

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The Betty Vinson situation at WorldCom, discussed in Chapter 1, is a case in point about the dangers of reducing dissonance by changing one's attitudes and behaviors. Vinson knew it was wrong to "cook the books." She felt it in her inner being, but she did not act on those beliefs. Instead, she followed the orders from superiors and later justified her behavior by rationalizing it as a one-time act and demanded by people who knew accounting better than herself. In a sense she reduced the importance of her own intuitions about the appropriateness of what she was asked to do.

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