Document Type

Journal article

Source Publication

Managerial Auditing Journal

Publication Date

1-1-2011

Volume

26

Issue

5

First Page

372

Last Page

392

Keywords

Earnings, Ethics, Accountants, China

Abstract

Purpose - The purpose of this study is to investigate the effects of Chinese industry accountants' perceptions of the ethical context in their organization and Machiavellianism on attitudes toward earnings management. Design/methodology/approach - The research is based on a survey of professional accountants employed by companies in Mainland China. Findings - The results indicate that perceptions of a strong organizational emphasis on serving the public interest (benevolent/cosmopolitan climate) significantly reduced professional accountants' willingness to condone accounting earnings management. Professionally certified accountants also judged accounting earnings management more harshly. Consistent with our expectations, high Machiavellians judged earnings management more leniently, although this effect was only marginally significant in the case of accounting earnings management. In contrast to prior studies of earnings management in the USA, the participants judged accounting earnings management more leniently, but judged operating earnings management more harshly. Originality/value - This is the first study to document that an organizational emphasis on serving the public interest can restrain aggressive behavior among industry accountants. Claims of serving the public interest in accounting have traditionally focused on the role of the independent auditor in protecting the public from misleading financial reporting. The results indicate that appeals to public interest obligations also have resonance for professional accountants in industry. The fact that certified accountants were less tolerant of accounting earnings management also has important implications, demonstrating the practical value of professional certification programs and their associated training and socialization processes. The contrast observed between the ethical judgments of our Chinese participants and US accountants surveyed in previous studies raises important questions for further research.

DOI

10.1108/02686901111129553

Print ISSN

02686902

E-ISSN

17587735

Publisher Statement

Copyright © Emerald Group Publishing Limited

Access to external full text or publisher's version may require subscription.

Full-text Version

Accepted Author Manuscript

Recommended Citation

Shafer, W. E., & Wang, Z. (2011). Effects of ethical context and machiavellianism on attitudes toward earnings management in China. Managerial Auditing Journal, 26(5), 372-392. doi: 10.1108/02686901111129553