Ch. 2 Cognitive Processes and Ethical Decision Making in Accounting

Cognitive Development

The thought process followed in one's moral development

Lawrence Kohlberg

Concluded that people develop childhood through adulthood through sequential and hierarchical series of cognitive stages that characterize the way they think about ethical dilemmas
-moral reasoning processes become more complex and sophisticated with deve

What is the name of the moral dilemma situation Kohlberg used to develop his theory?

Heinz and the Drug

Heinz and the Drug

Heinz's wife is sick and needs special medicine that has been priced unreasonably high, tells the drug dealer his wife is dying, still doesn't lower the price so Heinz steals the drug

Carol Gilligan

Criticized Kohlberg for using only males in his study
-she believes that women would need more information before answering the question of whether Heinz should steal the drug

Kohlberg's conclusion of his study

The highest clam of morality is the universal principle of justice

What were the three levels of response to the Heinz Dilemma?

Level 1- Pre-conventional
Level 2 - Conventional
Level 3- Post-conventional

Level 1- Pre-conventional

An uncomplicated response to moral problems
-choices are made based on the wants of the individual decision maker (egoism); self-centered

Level 2 - Conventional

The ends justify the means ; individual is aware of the interest of others and one's duty to society
-Personal responsibility becomes important

Level 3- Post-conventional

Society-wide perspective; principled morality (rule utilitarianism, justice orientation); there must be a society wide basis for cooperation

Level 1- Pre-conventional - Stage 1

Obedience to Rules; Avoidance of Punishment
-what is right is judged by one's obedience to rules and authority

Level 1- Pre-conventional - Stage 2

Satisfying One's Own Needs
-rules and authority are important only if acting in accordance with them satisfies one's own needs (egoism)

Level 2 - Conventional - Stage 3

Fairness to Others
-Not only motivated by rules but seeks to do what is in the perceived best interests of others, especially those in a family
-commitment to loyalty in the relationship

Level 2 - Conventional - Stage 4

Law and Order
-emphasizes the morality of law and duty in social order
-one's duty to society, respect for authority and maintaining the social order become the focus of decision making

Level 3- Post-conventional - Stage 5

Social Contract
-an individual is motivated by upholding the basic rights, values and legal contracts of society
-recognizes that in some cases the legal and moral points of view may conflict
-to reduce conflict, individuals at this stage base their decis

Level 3- Post-conventional - Stage 6

Universal Ethical Principles
-Kohlberg believed this stage rarely occurred
-person believes that right and wrong are determined by universal ethical principles that everyone should follow
-individuals believe that there are inalienable rights which are un

What does Kohlberg's model suggest?

People continue to change their decision priorities over time and with additional education and experience

Kohlberg believes his stage sequence is universal (same in all cultures) T/F

True

Whose theory does Kohlberg's universal belief conflict with?

Geert Hofstede's five cultural dimensions

William Crain

Addresses whether different cultures socialize their children differently, thereby teaching them different moral beliefs

What four key constituents groups does the ethical domain for accountants and auditors involve?

1. The client organization that hires and pays for accounting services
2. The accounting firm that employs the practitioner
3. The accounting profession (SEC) (PCAOB)
4. The general public
-responsibilities to each of these groups may conflict

James Rest's 4 Component Model of Ethical Decision Making

Describes the cognitive processes that individuals use in ethical decision making

4 Components

1. Moral Sensitivity
2. Moral Judgment
3. Moral Motivation
4. Moral Character

Moral Sensitivity

Requires the individual to interpret situations as moral and recognize that one's actions affect the welfare of others
-heightened moral sensitivity creates a culture that supports ethical action

Moral Judgment

The outcome of one's prescriptive reasoning is his ethical judgment of the ideal solution to an ethical dilemma

Prescriptive Reasoning

An individual's ethical cognition of what "ideally" ought to be done to resolve an ethical dilemma
-reflects his cognitive understanding of an ethical situation as measure by his level of moral development

Moral Motivation

An individual's willingness to place ethical values ahead of nonethical values hat relate to self interest (wealth, power, fame)

Moral Character

An individual's intention to act ethically and her ethical actions may not be aligned because of a lack of ethical character

Cognitive Dissonance

How we think we should behave is different that how we decide to behave
-coined by Leon Festinger