Only 12 percent of Americans rate business executives as highly ethical, according to a Gallup poll published Dec. 9. The ability of the private sector to practice self-control has been hotly debated.
ACU accounting professors, armed with databases, surveys and ethical theory, are investigating whether this distrust of businesses is founded. This summer, they will conduct the latest of many studies on the integrity of internal businesses regulation systems, said Dr. Scott Stovall, associate professor of accounting.
Stovall will partner with Dr. John Neill, professor of accounting, and Dr. Curtis Clements, associate professor of accounting, to examine the influence management has on audit committees. An audit committee is formed when an auditor is sent to examine a company’s financial accounts.
The committee is charged with cooperating with the auditor, even when it requires disregarding the company’s interests, Stovall said. But Stovall and Neill are now asking if reporting to management creates a conflict of interest for the committee.
“We wonder if they’re going to stand up to the management if they have to,” Stovall said.
To answer this question, the professors are turning to an audit analytics database containing lists of audit committee members, their compensation, boards of directors and other variables. They will sift through the data and look for correlations between variables and auditing outcomes, Stovall said.
He said it wouldn’t surprise him to find management influence on some audit committees. A similar study in which Stovall and Neill participated illustrated the effect that reporting to management had on employees in charge of regulating the company that hired them.
“We looked at whether corporate ethics officers were independent,” Stovall said. “We didn’t get very positive results with that one.”
The study involved interviewing 10 ethics officers, whose jobs were to improve their organizations’ ethical performance. Their interpretation of the results was published in the Journal of Business Ethics in an article titled An Investigation of Ethics Officer Independence: “- the average [ethics officer] needs more independence from company management in order to do his/her job effectively.”
Stovall and Neill maintained that to be effective, ethics officers should be hired by and report to a company’s board of directors rather than to management. The board of directors normally includes representatives from stockholders and the community as well as company executives.
Neill believes the research conducted throughout the accounting department is important to students planning to enter this field.
“We need to try to get students to think in advance what you are going to do when you’re faced with the situation that your manager wants you to do something unethical,” Neill said.
According to a study by Dr. David Perkins, professor of accounting, ACU students are thinking about the ethical decisions they make. Perkins surveyed about 500 accounting students during four semesters between 2004 and 2006. His questions tested whether students preferred to make choices based on their personal moral code or the specific situation.
Perkins was not willing to release the results of his unpublished study because too many of the students surveyed had a religious background for the study to accurately represent the general field of accounting. However, Perkins did say ACU students tested highly on character-centered decision making.
“What I felt good about is that our students had strong feelings about the importance of personal character in ethical choices,” Perkins said. “What we need to do is extend it to a public school setting.”
