Cognitive approach to understand the impact of conflict of interests on accounting professionals’ decision-making behaviour

ABSTRACT

This paper adopts a cognitive approach, by integrating social cognitive theory and throughput model, for examining the process through which conflict of interests affects the accounting professionals’ decision-making behaviour. The model has been tested by conducting a quasi-experiment with 105 professionals from the Big Four accounting firms in the UK. The low positive outcome expectancy of compliant decision-making, high perceived difficulty in making compliant decisions and less ethical judgements are evidenced to be the situational cognitive predictors, and high propensity to morally disengage the dispositional cognitive predictor of the likelihood of deviant decision-making behaviour. The proposed cognitive approach provides a novel perspective for investigating decision-making behaviour in situations involving the conflict of interests. To facilitate effective management of conflict of interests, this study suggests implementing behavioural interventions for strengthening the accounting professionals’ independence in fact.

KEYWORDS:

• Conflict of interests
• social cognitive theory
• throughput model
• accounting professionals
• cognitive approach
• independence in fact

Acknowledgements

My appreciation goes to Prof. Magdy Abdel-Kader, Dr Mirna Jabbour and Prof. Elaine Harris for their useful comments on my work this paper derives from. I am also grateful to the panel members and other attendees, for their constructive feedback, at the Management Accounting Research Group (MARG) Conference where I presented this work.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Maria Ishaque http://orcid.org/0000-0002-0408-2686

Notes

1 It can be argued that the conflict of interests might be avoided by avoiding the transactions or relationships that create these. While some of the recent regulatory reforms (e.g. the Sarbanes-Oxley Act) are meant to avoid the possible conflicts, this is not always possible. Following the interviews with four professionals from the Big Four (Appendix 1), it can conveniently be established that conflicts of interests abound in the professional accounting environment and are usually a natural phenomenon (especially when they are caused by environmental factors including the misaligned rewards and workplace pressures). Therefore, conducting this research becomes necessary because it is still not clear how decision-making behaviour, in the events of conflict of interests, is affected by the interplay of the professionals’ mental processes.

2 Independence in appearance is about the public’s perception that an accounting professional (and the accounting firm) is objective in conduct and forms impartial judgements (Dopuch, King, Schwartz, & Zhang, 2003; Salehi, 2009).

3 Independence in fact denotes actual objectivity and a state of mind characterised by the professional’s unbiasedness and integrity (Dopuch et al., 2003; Salehi, 2009).

4 The S-R Paradigm provides that “behaviour is the result of stimulus” (Holland, 2008).

5 The S-O-R Paradigm provides that “in the face of stimuli, organisms form cognitive representations (i.e. perceptions and judgements) of the world and respond through their conduct, actions or behaviour” (Holt et al., 2015).

6 For details on moral philosophies, see Rodgers (2006).

7 The research instrument was emailed to a total of 2283 professionals. A total of 110 emails bounced and 2173 got sent, out of which only 591 emails got opened (the rest of the emails, as suggested by the Qualtrics team, ended up in the spam/junk folder of the recipients). Out of the 591, the 239 were the opt-out, refusal and incomplete responses and 105 the complete responses. The response rate based on 591 opened emails was 18% (i.e. 105/591) which, according to various scholars (e.g. Bryman & Bell, 2007; Dillman, Smyth, & Christian, 2008; Saunders, Thornhill, & Lewis, 2009) is acceptable in case of the research based on convenience sampling.

Additional information

Funding

This paper is based on the empirical study conducted for my PhD. I received a PhD grant/studentship from the Anglia Ruskin University (United Kingdom).