7th Global Conference on Business & Economics

ETHICAL EVALUATIONS OF ACCOUNTANTS:

AN EMPIRICAL STUDY OF LATIN AMERICA AND
THE UNITED STATES

Dr. Silvia Lpez-Palu

Assistant Professor
University of Puerto Rico
Recinto de Rio Piedras
P.O.Box 23332, San Juan, PR 00931-3332
Department of Accounting
School of Business Administration
Telephone: (787) 764-0000 xt 3330
(787) 632-3919
Fax: (787) 773-1716
E-mail: slopez@coqui.net or silopez@uprrp.edu

ISBN : 978-0-9742114-9-4

7th Global Conference on Business & Economics

EHICAL EVALUATIONS OF ACCOUNTANTS:
AN EMPIRICAL STUDY OF LATIN AMERICA AND THE UNITED
STATES
ABSTRACT
Despite the amount of accounting ethics research conducted over
many years, ways to improve the measurement instruments and to make
them appropriate for application in other cultures or countries are still
needed. In that direction, the main purpose of this study is to test a modified
Multidimensional Ethics Scale (MES) to measure the ethical evaluations of
Latin American and United States accountants and to determine the effects
of culture and gender on the results.
This study reviews the ethical evaluations of 2,297 accounting
students from ten Latin American countries and the United States. The data
examined was collected as part of a larger study on the ethics decisionmaking process. The study found important differences in the evaluative
criteria between the Latin American and the United States respondents,
providing new evidence to support the relationship between ethics and
culture. In addition, the results provide supportive evidence to Gilligan's
theory but contrary to Kohlberg's, pointing the need to new approaches to
ethics research. The results suggest that individuals use multiple moral
concepts simultaneously to make their ethical evaluations and adjust them
according to their culture and the situation. No important differences in the
evaluative criteria by gender were found in the Latin American sample
suggesting that differences in ethical behavior are not due to the individuals'
ethical core.
INTRODUCTION
Ethics researchers are faced with two main challenges. First, they
have to develop adequate language and theories on which to base the
discussion and research. Second, quantitative approaches to the study of
ethics must be developed to gain the respect of colleagues in research areas
that are more numbers oriented (Bay 2002). Kohlbergs Stage Theory of
Moral Development and the related Defining Issues Test (DIT) developed
by Rest (1979) appear to solve these problems. The former provides a
theoretical framework, and the latter provides a quantitative measure that
may be used in further analysis. Despite the amount of accounting ethics
research conducted over many years, these two main problems remain
unsolved. In that direction, the objectives of this study are to develop a scale
to measure the ethical evaluations of Latin American accountants and to
determine the effects of culture and gender on the results.

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LITERATURE REVIEW
Moral development theory has a long tradition in research.
However, prior empirical research has not confirmed the theorys efficacy in
explaining behavior in the business ethics context. In general, researchers
assume a link between moral development and behavior, ignoring the poor
relationship found in empirical research. Moreover, the assumption of
universality has been taken for granted, reducing the analysis and
interpretation of results to preconceived ideas. Marburg (2001) suggested
that it is time to leave the concept of moral development and search for
something new, or to pursue other theoretical directions that result in the
development of concepts with behavioral content. Some researchers have
pointed to the possible bias of the measurement instrument (Tsui 1996; Ho
1997; Sweeney 1995; Ma and Cheung, 1996), while others, such as Gilligan
(1982, 1987) and Reiter (1996), have pointed to a possible bias at the
theoretical level.
In the 1990s, an empirical approach emerged in accounting that
relied on the multidimensional ethics scale (MES). Reidenbach and Robin
(hereafter R&R, 1988) developed this scale based on a survey of moral
philosophy literature. The MES is designed to identify the rationale(s)
behind moral reasoning and the reasons for respondents ethical evaluations
of particular actions. They identified five normative modes of moral
reasoning: justice, relativism, utilitarianism, deontology, and egoism.
The most influential concepts in justice theory come from the
writings of Aristotle. His principle of formal justice specifies that equals
should be treated equally. Moral equity philosophy, which is founded on the
general concepts of fairness and justice, has been extremely prominent in
contemporary moral thought. Kohlbergs and Rests cognitive moral
development literature, for instance, strongly relies on moral equity (Rest
1979).
Proponents of relativism argue that ethical rules are not universal.
This type of reasoning is based on the idea that each society or individual
has its own ethics, values, and rules of conduct. These rules are linked to
culture and are not necessarily applicable to other cultures or individuals.
Deontology suggests that ethics are subject to the duties,
obligations, or implied contracts among individuals and between individuals
and society. The duties of one individual toward another create rights for the
latter. Deontological ethics attempt to determine only what is correct; these
ethics do not provide guidelines on how to live a happy life. In contrast,
teleological (consequential) ethics attempt to determine what is good for
humans. This point of view judges the rightness of an action based on its

7th Global Conference on Business & Economics

consequences. Two theories in this category are egoism and utilitarianism.
The first defines right behavior in terms of its consequences for the
individual. The latter seeks to achieve the greatest good for the greatest
number of people.
The MES has been used in studies of ethical judgment in
marketing (Reidenbach et al. 1988, 1990, 1991; Tsalikis and Nwachukwu
1990; Tsalikis and Ortz 1988; Tsalikis and LaTour 1995; Hansen 1992), in
management (Kujala 2001; Henthorne et al. 1992), in information
technology (Selwyn and Griffith 2001), and in accounting (Flory et al.
1992; Cohen et al. 1993a, 1995, 1996, 1998, 2001; Lpez-Palu 2000,
2001, 2006; Cruz et al. 2000). The instrument was constructed from a
United States sample and might not be appropriate in other cultures. Cohen
et al. (1993b, 1998) explicitly noted the importance of testing the validity of
the scale in an international setting.
Several researchers have found cross-national differences in ethical
reasoning in a business context. Most of these studies have focused on
making comparisons among the ethical perceptions, codes, or training of
people from Asia, Europe, and the United States (Becker and Fritzsche
1987; Langlois et al. 1990; Dubinsky et al. 1991; Honeycutt et al. 1995;
Singhapakdi et al. 1994; Whipple et al. 1992; White et al. 1992; Lysonski
1991; Kaufman 1985). Most empirical studies in accounting ethics have
produced evidence of a relationship between ethics and culture (Karnes et
al. 1989; Agacer et al. 1991; Gul et al. 1993; Schultz et al.1993; Cohen et al.
1995; Brody et al. 1998, 1999; Teoh et al. 1999; Smith and Hume
2001,2005). In general, the results of such studies suggest that differences in
accountants approaches to ethical dilemmas depend on their cultural
background. The results obtained by Shaefer et al. (1999) indicate that such
differences persist even when subjects are submitted to an acculturation
process in a foreign country. Although cultural differences in ethics among
people of Asia, Europe, and the United States have been examined, Latin
America has not been studied to the same extent.
Many researchers have devoted considerable effort to finding
gender differences in various ethical issues. At present, there are no
conclusive results concerning the existence of a gender effect or its
direction. Contradictory results have been obtained independently of the
sample or the instrument used (DIT or MES) to measure the relationship
between gender and the ethical decision-making process. Gilligans claim
that women score lower on the DIT points to a possible gender bias against
them in the instrument. However, Shaub (1994) found that women score
higher on the DIT than men do.

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Other research, including a meta-analysis of 56 studies, found no
gender effects or quite small effects (Thoma 1986). In a revision of several
marketing ethics studies, Tsalikis and Fritzsche (1989) noted that most
researchers found that females behave in a more ethically consistent way
than males do. In accounting and other disciplines, some studies have
suggested that womens judgments tend to be more ethically sound than
those of men (Cohen et al. 1998; Bebeau and Brabeck 1987; Dugan 1987),
while others have found no significant differences between the ethical
decisions of men and women (Kidwell et al. 1987; Tsalikis and OrtzBuonafina 1990; Patterson 1994; Lpez-Palu 2000).
Collectively, the studies on accounting ethics suggest that (1) there
is a poor relationship between moral development and behavior; (2) there
are possible theoretical and measurement bias on moral development
studies; (3) the MES instrument seems to be a good tool for ethics research
but might not be appropriate in other cultures; (4) there is a link between
ethics and culture; and (5) there are no conclusive results concerning the
existence of a gender effect or its direction on ethics research.
METHODOLOGY
Respondents evaluated three scenarios according to the seven
moral philosophies presented in the MES (see questionnaire in Appendix
A). The scenarios used in the present study were used in prior studies
(Cohen et al. 1996, 1998, 2001; Lpez-Palu 2000, 2001, 2006). These
scenarios cover a range of general business activities. The questionnaire
was translated into Spanish (the first language in the examined Latin
American countries, and the first language of the author of this study).
Some changes to vocabulary were made to render the expressions more
familiar to Latin American students. An independent translator then
translated the items back into English. The original items were compared to
ensure that changes in expressions did not change the content of the items.
The MES scale was modified in this study in many ways. First,
some of the endpoints of the scale were changed to create contrary poles.
Second, instead of a seven-point Likert scale, a 10 cm line with two poles is
used, on which the subject will place a mark to indicate his or her desired
response. A physical measure taken with a ruler is used to derive a
percentage. In this way, a non-metric ordinal variable is transformed to a
continuous metric variable, capturing the intensity of the subjects response.
Third, some items, such as, justice, utilitarian, and relativism measures,
were modified. Fourth, new items were included to measure religion and
ethics of care.

7th Global Conference on Business & Economics

RESULTS
The data examined was collected as part of a larger study on the
ethical decision-making process. The results presented here are limited to
the respondent's ethical evaluations. The Latin American countries samples
were analyzed together as one group and then compared with the United
States sample.
Sample Description
The Latin American sample was drawn from accounting students
in 24 universities in ten countries while the United States sample was drawn
from accounting students of five universities in five states. Table 1
summarizes the characteristics of the Latin American sample in panel A and
of the United States sample in panel B. The total number of respondents
was 2,120 for the Latin American and 177 for the United States sample.
The proportion of female/male in the Latin American and United
States samples were about 2:1. This proportion is quite different compared
to the proportion of female/male in the population of these countries of
about 50:50, as reported by the CIA World Fact Book for the year 2004.
However, most of the collaborators claim that there is a trend of more
women than men enrolling in accounting programs.
Eighty-four percent of the Latin American sample and fifty-seven
percent of the United States' is between 17 and 25 years old. The
distribution among social classes is very similar in all the countries. More
than half of the respondents of each sample consider themselves as part of
the middle class of their country. About three quarters of the Latin
American sample and forty-five of the United States' reported to be
catholic. This finding is in agreement with the percentages reported in the
CIA World Fact Book for the Latin American populations about the
religious denominations.
The sample from the United States has a higher percent of
Catholics over Protestants, which is opposite to the distribution in the
population. Given that religion is one of the variables examined here, it is
important to mention the high percentages obtained in the answer of no
religion exhibited in the samples of Uruguay, Chile, the United States,
Puerto Rico and the Dominican Republic. These samples exhibit higher
percentages of people with no religion than that reported for the population,
except the Uruguayan sample.
Descriptive Statistics
Table 2 presents the descriptive statistics, the correlations among
variables and the factor reliability coefficients for each scenario. Panels A to

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C present the Latin American results by scenario and panels D to F provide
the United States results.
Mean scores
Mean scores range from zero, indicating that respondents evaluate
as ethical the action described based on each particular philosophical notion
to 100 indicating an unethical evaluation. The mean of each ethical
evaluation measure shows that Latin American respondents tend
consistently to evaluate the actions described in the three scenarios as more
unethical based on the justice, deontology, ethics of care, religion and
utilitarian notions than based on the egoist and relativistic rationales. The
mean scores of the United States sample show that respondents tend to
evaluate the actions unethical based on all the moral rationales excepting
the egoism notion. Latin American respondents evaluated the three
scenarios as more unethical than their United States counterparts based on
the justice and deontology rationales, but less unethical based on the egoism
concept.
Reliability
Chronbachs alpha coefficients, for both samples, demonstrate that
the reliability of justice, egoism, care, religion, relativism and utilitarianism
factors exceeds (.60). The generally agreed upon lower limit is .70 as
advocated by Nunally and Berstein (1994). However, it may decrease to .60
in exploratory research (Hair et, al., 1998).
For the Latin American sample, the deontology factor shows an
alpha coefficient for the entire scale from .57 to .59 in the three scenarios.
However, if the item It is a duty bond to act this way was dropped the alpha
coefficient increase to .64, .66 and .65, respectively by scenario, thereby,
reaching the acceptable minimum for further analysis. For the United
States sample, the alpha coefficient for the entire scale range from .50 to .
66. However, if the duty item was dropped the coefficients increase to .81
and .82. For that reason, only this item was dropped, in both samples,
instead of the entire scale. It seems that the duty bound item is capturing
one deontological notion, the duty to act in a determined way. The two
remaining variables are more concerned with the existence of contracts
among individuals that produce moral obligations, which is in more
agreement with the contractualism notion. The deletion of that item does not
affect the content validity of the scale because contractualism is one of the
different deontological theories. Contractualism is a theory that bases either
moral obligation in general, or the duty of political obedience, or the justice

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of social institutions, on a contract, usually called a 'social contract'. The
contract may be allegedly historical, tacitly implied, or imaginary.
Validity of findings
The scales used in this study were adopted from previous studies
where the content validity was established. Modifications, refinements, and
additions made to those scales were based on a careful literature review.
The scores used in this study fulfill the conditions for ensuring content
validity. Intercorrelations among the variables contained in each factor were
significant at p<.0001 and moderate or high in magnitude pointing to
adequate convergent validity. Intercorrelations among the variables of
different factors were low in magnitude pointing adequate discriminant
validity. External validity is concerned with the degree to which results can
be generalized to the population. This study used a conveniently selected
sample of accounting students. The findings cannot, and will not, be
generalized to the population.
Factor Analyses
Two ways to determine the adequacy of factor analysis are the
Bartlett test of sphericity and the Kaiser-Meyer-Olkin measure of sampling
adequacy (Hair et al, 1998). All Bartlett tests conducted for both samples
show that nonzero correlations exist at the 0.00 significance level. The
KMO indexes range from .90 to .92 for the Latin American sample and
from .70 to .86 in the United States. Both measures establish the adequacy
of the factor analysis for the samples.
The responses to each of the three scenarios were tested by the
principal component factor analysis using varimax rotation. Table 3 shows
the factor loadings by scenario. Factor loadings show the association
between the variable and the factor. A factor loading value is considered
significant depending on the sample size and the number of variables and
factors. Higher loadings make the variable more representative of the factor
and more important to interpret the factor matrix. Factors loadings greater
than .50 are considered practically significant (Hair et al., 1998). In order
to facilitate the interpretation of the factor structure, a cutoff of .50 was
used to include an item into a factor and an eigenvalue of 1.00 to retain a
factor. All the items load significantly on only one factor and all the factors
have eigenvalues greater than 1.00.
Different factors emerged by scenarios and samples suggesting that
the criteria to make ethical evaluations are situation specific. The emerged
factors do not correspond strictly to the normative moral philosophies. This
is not entirely surprising because while each philosophy has its own unique
conceptual core, there does exist some conceptual overlap among them.

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The factors explain between 55 and 61 percent of the variance from the
Latin American sample and between 65 and 75 percent in the United States'.
Latin American sample structure
In general, Latin American respondents use four main notions in
their ethical decision making process: (1) Religious Justice dimension, (2)
egoism, (3) deontology, and (4) relativism. The egoism, the two retained
deontological items and the relativism rationale emerged consistently as the
expected separate dimensions. Religious justice seems to be a broad
dimension composed of elements of justice, religion, care and
utilitarianism.
The identification of this broad dimension is particularly important
for several reasons. First, this broad dimension includes a religious
component that was not included in previous studies that left out important
evaluative criteria. Second, it includes a caring element that did not emerge
in previous MES studies using United States samples. Third, it includes
utilitarian elements that did not emerge in some studies or emerged as a
separate dimension in others. Fourth, the composition of this dimension
suggests that the justice rationale is more complex than was considered
previously, that its meaning is not universal, and that it seems to be highly
related to the respondents' religious foundation.
The composition of the broad dimension changes by situation.
However, several elements emerged consistently across scenarios: the
religion dimension, two justice items (just and honest), one utilitarian
variable (on balance it is good), and one caring variable (prevents harm to
others). This mix of elements suggests that the main core of this evaluative
dimension is based on the respondents' religious foundation reinforced by
their sense of justice. They also consider the consequences to others in
terms of the harm that it may produce and if justice is served. The
utilitarian variable (on balance it is good) attempted to measure the concept
of tradeoff among good and evil to produce the greatest good for all society.
However, it appears that Latin American respondents ascribe a different
meaning to the variable relating it with the distribution of justice instead of
the intended utilitarian meaning. Individuals and societies often use
different distributive principles in different situations. The results suggest
that the caring variable prevents harm to others, is capturing a concept of
respect to the integrity and dignity of human beings as if it were a universal
law. Due to the fact that the harm is expressed in general terms, it may
include physical, emotional, economic or any kind of harm.
In summary, Latin American respondents evaluate ethical
dilemmas using different criteria simultaneously. In general, they consider

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their religious principles first together with the consequences to others and
if justice is served. Then they evaluate social obligations followed by the
acceptability of the action. The last consideration is the effect of the action
on them.
United States sample structure
In general, United States respondents use five different notions in
their ethical decision making process: (1) the Religious utilitarianism
dimension, (2) the deontology justice dimension, (3) egoism, (4) relativism
and, (5) solidarity. Egoism and relativism emerged consistently as the
expected separate dimensions. The caring items related with solidarity
emerged as a separated factor in two cases.
Religious Utilitarianism seems to be a broad dimension that
changes its composition by situation. Several elements emerged consistently
across scenarios: the religion dimension, the utilitarian dimension, and one
caring variable (prevents harm to others). This mix of elements suggests
that the main core of this evaluative dimension is based on the respondents'
religious foundation taking into account the best for the most, but
considering the consequences to others in terms of the harm that it may
produce.
The two retained deontological items emerged as a factor in one
instance, but including justice elements in the other two cases. The justice
elements emerged as part of the deontological or religious utilitarian factors.
This mix of concepts suggests that respondents' concept of justice is rooted
in their religious ideas or in their sense of duty.
In summary, United States respondents evaluate ethical dilemmas
using simultaneously different criteria. In general, they consider their
religious principles first together with the effect in society. Then, they
evaluate social obligations linked with the action and its fairness. The
acceptability of the action and the consequences to them are then
considered. In most cases, solidarity is the least important consideration in
making an ethical evaluation.
Gender Comparison
The United States sample size and composition was not adequate
to run factor analyses by gender. Latin American sample results are
summarized in Table 4. There are no major differences in the evaluative
criteria used by gender to make their evaluations. This result suggests that,
in Latin America, men and women evaluate the situations in the same way.
This result is consistent with the results found by Lpez-Palu (2006),
which suggest that the difference in the socialization process by gender does

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not necessarily result in differences in how people think, but influences how
people act.
DISCUSSION
As expected, the Latin American respondents' evaluative criteria
differ from the one of United States. This result adds evidence to the link
between ethics and culture. The main difference between the samples is the
composition of the religious broad dimension. While the religious
dimension of both samples include utilitarian concepts and a consideration
to prevent harm, the Latin American dimension includes, in addition, the
justice and caring notions. The composition of this dimension is not totally
surprising in any of the samples.
The merge of religious and utilitarian concepts may be explained
by the consequentialist rationale behind both notions. It may be argued that
the moral systems of most religions consist of moral codes, which are lists
of prescriptions (things people must do) and proscriptions (things people
must not do). Prescriptions are associated with good consequences (people
go to heaven) and proscriptions are associated with bad consequences
(people go to hell). Then, people should behave according to the
prescriptions and avoid the proscriptions to have good consequences.
In the case of Latin America, where the Catholic religion is the
most frequent, there are specific proscriptions regarding not to harm others
and the importance to act according to God's justice. The separation of the
state and the church is a relatively new phenomenon in many Latin
American countries while in the United States it has been the law over more
than two centuries. It is expected that moral values in Latin American
countries be more strongly linked to the individuals' religious beliefs than in
the United States. Given that religion is one cultural value, this result
supports the argument that cultural transformations occur at a very slow
pace.
The inclusion of the caring variables in the religious dimension of
the Latin American sample and its exclusion in the one of the United States
may be explained due to another cultural characteristic. The people of the
United States are described by Hofstede's work as individualistic while
Latin Americans as collectivistic. The variables show care for key
relationships and show empathy for others seem to capture the harmony and
camaraderie among persons that may be defined as solidarity. This
interdependence among people takes into account the consequences over
the welfare of the group. In most cases, this concept is of primary
importance to the Latin American sample while of the least importance to
the United States sample. This finding supports Gilligan's theory of ethics.

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Gilligan's theory can be summarized as a process where people
evolve from isolation to dynamic interrelationships where the needs of
others are important. The claim of Gilligan of a second voice speaking of
connection, care, and response appears to be valid in Latin America. The
findings show that the care and justice elements were part of a broad
dimension, supporting Gilligan's idea of two complementary voices.
Moreover, they provide evidence to support Gilligan's claim that Kohlberg's
theory reflects the ideals of one country in particular, which may not be
valid in other contexts.
Kohlbergs model equates adulthood with a justice perspective and
equates maturity with separation, self-sufficiency, and independence.
Gilligans model equates adulthood with concern and caring individuals,
and maturity with interdependence. In her view, theories of justice and
autonomy describe individuals as separate entities relating to others in a
hierarchical or contractual way. This argument is consistent with the United
States sample dimension of deontological and justice elements that have a
higher importance than in the Latin American sample. Results suggest that
Latin Americans interact taking into account justice and caring, as claimed
in Gilligan's work. The United States sample results partially support the
Kolhberg view where people interact according to the obligations and rights
giving minor importance to others welfare.
However, the results provide evidence contrary to Kolhberg's
assumptions of a universal standard of moral development. The moral
development theory can be summarized as a process where people evolve
from egoism to justice and contractualism rationales. The results show that
Latin American and United States respondents use, simultaneously, justice,
contractualism, relativistic, and egoist rationales to make their evaluation
and make their decisions1. Applying Kolhberg's theory, the results imply
that people may be at the same time at different stages of moral
development, in a clear contradiction with the process stated by the theory.
This finding suggests that there is not a hierarchical evolution in the
individuals' moral development. Instead, there are multifactorial evaluative
criteria that people adjust to make their evaluations.
It is interesting that the Latin American sample gives higher
importance to the egoism rationale to make their evaluations than the one of
1

This finding supports the Hunt and Vitell model (1986) in the

Latin American context. They posited that individuals use teleological

rationales simultaneously to make their evaluations.

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the United States. This finding is particularly interesting because egoism
has been important in business due to the work of Adam Smith, who argued
that through an invisible hand business operating in its own self interest will
produce the greatest economic good for society. Smiths work provides a
link between egoism and the utilitarianism because the concern for society
is utilitarian. Much of the justification for capitalism is based in egoism and
utilitarian concepts. Then, it is somewhat surprising that people from
United States, a leader in capitalist and democratic values, give lesser
importance to the egoism rationale to make their evaluations than Latin
American countries, not necessarily known by their democratic or capitalist
ideals.
The United States sample gives a little higher importance to the
relativism rationale than the Latin American sample. In the Latin American
context, this rationale may be related to the collectivistic nature ascribed to
those countries. Due to their strong sense of belonging, they are willing to
internalize, promote and perpetuate some behaviors distinctive of the group,
making them traditions and part of the culture. In the case of the United
States, this rationale may be related to its legal system, which focuses in the
acceptability of particular situations. The United States legal system is
based on common law. Common law is based on the rights created by case
resolution. In a common law system the remedy precedes the right. Then it
is not surprising that the United States respondents give attention to the
rights and obligations that may be derived from the particular situation
while for Latin American respondents this is not particularly important
because the rights and obligations are created by legislation.
FINAL REMARKS
This study contributes to the accounting ethics literature providing
new evidence to support the relationship between ethics and culture. In
addition, it provides supportive evidence to Gilligan's theory, but contrary to
Kohlberg's theory pointing the need to new approaches to ethics research.
The results suggest that individuals use multiple moral concepts
simultaneously to make their ethical evaluations and adjust them according
to their culture and situation.
As in all studies, there are limitations that must be reported. First,
Latin American accountants are the focus of this research, but university
accounting students in their final years of study were selected as subjects.
Another inherent difficulty to conduct cross-cultural research relates to the
accuracy of the translation process. Despite the reasonable precautions
taken to ensure the equivalency of the two language versions, there is a

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possibility that subtle differences in translation may have affected the
results.
In the future, it will be interesting to conduct similar studies of
different groups and countries to identify the patterns of evaluative criteria
that will help to generalize the findings. Since religion is one of the most
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