An Examination of How Entry-Level Staff Auditors Respond to Tone at the Top vis-à-vis Tone at the Bottom

41 Pages Posted: 22 Feb 2012 Last revised: 5 Feb 2015

See all articles by Jeffrey S. Pickerd

Jeffrey S. Pickerd

The University of Mississippi

Scott L. Summers

Brigham Young University - School of Accountancy

David A. Wood

Brigham Young University - School of Accountancy

Date Written: June 23, 2014

Abstract

Prior academic and practitioner literature argues that the ethical tone at the top of an organization is a key factor in establishing an effective internal control environment. Drawing on self-concept maintenance theory and in-group bias theory, we predict that entry-level staff auditors will disregard a company’s ethical standards unless they observe a strong ethical tone from both their partner (tone at the top) and their supervising senior (tone at the bottom). Also, we predict that staff auditors will be more influenced by the tone of their supervising senior than the partner when these two individuals provide conflicting tones. In a 2 x 2 experiment that manipulates the tone set by a staff auditor’s supervising senior and engagement partner, we provide evidence consistent with our expectations. Further analyses suggest that participants made less ethical decisions because they were less likely to view the situation as an ethical dilemma when either the senior or partner exhibited low tone. The results of this study emphasize that tone at the top is not, by itself, sufficient to produce ethical decision making; organizations must strive to foster a strong ethical tone throughout the entire organization, especially at lower levels of the organization.

Keywords: Accountability, Auditing, Control Environment, Tone at the Top, Underreporting

JEL Classification: M4, M41, G3, G34, L20, L84, M14, M59

Suggested Citation

Pickerd, Jeffrey Scott and Summers, Scott L. and Wood, David A., An Examination of How Entry-Level Staff Auditors Respond to Tone at the Top vis-à-vis Tone at the Bottom (June 23, 2014). Behavioral Research in Accounting, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2008932 or http://dx.doi.org/10.2139/ssrn.2008932

Jeffrey Scott Pickerd

The University of Mississippi ( email )

University, MS 38677
United States

Scott L. Summers

Brigham Young University - School of Accountancy ( email )

516 TNRB
Provo, UT 84602
United States
801-422-9790 (Phone)
801-422-0621 (Fax)

David A. Wood (Contact Author)

Brigham Young University - School of Accountancy ( email )

518 TNRB
Brigham Young University
Provo, UT 84602
United States
801-422-8642 (Phone)
801-422-0621 (Fax)

HOME PAGE: http://marriottschool.byu.edu/employee/employee.cfm?emp=daw44

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