Effect of Guanxi and Ethical Orientations on Chinese Auditors’ Ethical Reasoning

Managerial Auditing Journal. Vol 28, No 9, 2013

39 Pages Posted: 14 Jan 2008 Last revised: 25 Jan 2017

See all articles by Mingzhi Liu

Mingzhi Liu

University of Manitoba - Asper School of Business

Date Written: June 1, 2013

Abstract

Purpose – The purpose of this study is to investigate the effect of Chinese auditors’ personal values (guanxi and ethical orientations) on their ethical reasoning (ethical judgments and behavioral intentions). In addition, this study aims to explore the joint effect of guanxi and ethical orientation on auditors’ ethical reasoning.

Design/methodology/approach – This study is based on a field survey of 191 auditors working in Certified Public Accounting (CPA) firms that operate in People’s Republic of China (China).

Findings – The main findings indicate that guanxi and relativism orientations negatively associate with, while idealism orientation positively associates with auditors’ ethical judgments and behavioral intentions. However, when decomposing the overall ethical judgment into three judgment groups, the main effects of guanxi and ethical orientations on auditors’ ethical judgments become marginal and those effects are fully hold only when using acceptability as criteria to judge the questionable vignettes. In addition, the results of the joint effect of guanxi and ethical orientations indicate that guanxi orientation weakens both the positive effect of idealism and the negative effect of relativism orientations on auditors’ ethical reasoning.

Originality/value – This study contributes the literature by investigating the ethical reasoning of auditors in a country with relatively weak legal system that relies on guanxi (literally, interpersonal relationships and connections) culture to operate business. Furthermore, this study extends the literature by documenting the moderating effect of guanxi orientation on the relation between auditors’ ethical orientation and their ethical reasoning.

Keywords: Ethical Reasoning; Guanxi; Idealism; Relativism

JEL Classification: M41

Suggested Citation

Liu, Mingzhi, Effect of Guanxi and Ethical Orientations on Chinese Auditors’ Ethical Reasoning (June 1, 2013). Managerial Auditing Journal. Vol 28, No 9, 2013. Available at SSRN: https://ssrn.com/abstract=1083187 or http://dx.doi.org/10.2139/ssrn.1083187

Mingzhi Liu (Contact Author)

University of Manitoba - Asper School of Business ( email )

460-181 Freedman Crescent
Winnipeg, Manitoba R3T 5V5
Canada
204-474-6847 (Phone)

HOME PAGE: http://umanitoba.ca/faculties/management/faculty_staff/academic_professors/mingzhi-liu.html

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