A Survey on the Effect of Auditing Firm’s Size and the Organizational Level of Auditors on the Ethical Reasoning at Different Stages of Kohlberg's Theory of Cognitive Moral Development

Document Type : Research Paper


1 Assistant Prof., Department of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran.

2 Associate Prof., Department of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran.

3 MSc., Department of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran.


Objective: This study is designed to investigate the effect of auditing firm’s size and the organizational level of auditors on the ethical reasoning at different stages of Kohlberg's theory of cognitive moral development. Methods: This study is a descriptive survey. A questionnaire containing a scenario was used to collect research data. 355 questionnaires were collected at 2020 from auditors working in private audit firms and the Audit Organization. Data were analyzed using descriptive statistics and regression analysis. Results: The present study has three main findings: The first shows that the ethical reasoning of Iranian auditors is at the post-contractual level of Kohlberg’s theory. The second indicates a negative relationship between the levels of ethical reasoning and the size of audit firms, and finally the last finding shows that with improving auditors' position in audit firms, their levels of ethical reasoning decreases. Conclusion: The results indicate that the size of the auditing firms and the organizational level of auditors affect on their ethical reasoning. The findings of this study can help policy makers and legislators to avoid the potential risk of negligence by auditors.


Abdelhak, E., Elamer, A., Mclaughlin, C., & Alhares, A. (2019). Auditors’ ethical reasoning in developing countries: The case of Egypt. International Journal of Ethics and Systems, 35(4), 558-583.
Aghaei, A., & Ahmadi, N. (2016). The effects of interaction among audit firmsethical culture, audit team norms and auditors personality type on auditors' intention to report detected errors. Empirical Accounting Research, 5(3), 33-52. (in Persian)
Allen, P.W., & Ng, C.K. (2001). Self-interest among CPAs may influence their moral reasoning. Journal of Business Ethics, 33(1), 29-35.
Amiri, E., & Fakhari, H. (2020). A composite index for audit opinion shopping based on discriminant analysis techniqueAccounting and auditing review, 27(1), 1-31.
(in Persian)
Ardelean, A. (2013). Auditors’ ethics and their Impact on Public Trust. Procedia - Social and Behavioral Sciences, 92, 55-60.
Armstrong, M. B. (1987). Moral development and accounting education. Journal of Accounting Education, 5(1), 27-43.
Bagheri, M, & Tavallaee, R. (2010). The effect of organizational commitment on organization performance reviewed. Journal of Police Development, 30, 73-96. (in Persian)
Bampton, R., & Cowton, C. (2013). Taking stock of accounting ethics scholarship: a review of the journal literature. Journal of Business Ethics, 114(3), 549-563.
Borkowski, C., & Ugras, Y. (1998). Business students and ethics: A meta-analysis. Journal of Business Ethics, 17(11), 1117–1127.
Chan, S.Y., & Leung, P. (2006). The effects of accounting students’ ethical reasoning and personal factors on their ethical sensitivity. Managerial Auditing Journal, 21(4), 436-457.
Christensen, A. L., Cote, J., Latham, C. K. (2016). Insights regarding the applicability of the defining Issues test to advance ethics research with accounting students: a meta-analytic review. Journal of Business Ethics, 133(1), 141-163.
Comprix, J., & Huang, H. (2015). Does auditor size matter? Evidence from small audit firms. Advances in Accounting, 31(1), 11-20.
DaryaeiA, &Azizi, A. (2018). The impact of ethics, experience and competency on audit quality: professional skepticism as a moderating variable. Financial Accounting Knowledge, 5(1), 79-99. (in Persian)
Davoodi, A, & Hooshmand, A. (2016).The relationship between ethical reasoning and other dysfunctional ‎behaviors of auditors. Journal of Ethics in Science and Technology, 13(4), 133-139. (in Persian)
Davoodi, Gh, & Hooshmand, A. (2013). Investigating the effect of organizational ethics culture on auditor behavior. Journal of Audit Science, 13 (3), 107-126. (in Persian)
Elias, R. Z. (2002). Determinants of earnings management ethics among accountants. Journal of Business Ethics, 40(1), 33-45.
Espinosa, P., & Barrainkua, M. (2016). An exploratory study of the pressures and ethical Dilemmas in the audit conflict. Revista de Contabilidad, 19(1), 10-20.
Etemadi, H., Rahmani, A., Azar, A, & Hasarzadeh, R. (2012). Critical review of quality of financial reporting researches and information-uncertainty based theory of quality. Journal of Management Accounting, 5 (4), 1-18. (in Persian)
Farajzadeh, H. (2019). How personality and gender relate to ethical judgment of accountants: evidence based on discipline. Journal of Value & Behavioral Accounting, 4(7), 181-208(in Persian)
Ford, C., & Richardson, D. (1994). Ethical decision making: a review of the empirical literature. Journal of Business Ethics, 13(3), 205-221.
Fornell, C., & Larcke, D. (1981). Evaluating structural equation modeling with unobserved variables and measurement error. Journal of Marking Research, 18(1), 39-50.
Ge, L., & Thomas, S. (2008). A cross-cultural comparison of the deliberative reasoning of Canadian and Chinese accounting students. Journal of Business Ethics, 82(1), 189-211.
Gilligan, C. (1982). In a different voice: Psychological theory and women’s development. Cambridge, MA: Harvard University Press.
Hajiha, Z, & khodamoradi, E. (2017). The role of ethical culture in auditors functions. Journal of Ethics in science and Technology, 11(3), 125-130. (in Persian)
Haron, H., Smail, I., & Na, A. L. (2015). The effect of moral reasoning, exposure to ethics and Perceived ethical climate on ethical judgement of auditors in Malaysia. Asian Journal of Business and Accounting, 8(2), 25-66.
Hoseini, M., Banimahd, B., & Ohadi, F. (2014). Comparing ethical oriental in the medical community and auditors. Journal of Cultural Management, 8(26), 117-127. (in Persian)
Ingrid, N. (2005). Factors impacting on ethical behavior in organizations. Working Paper, University of Pretoria, Meslike Hulpbron Bestuur.
Iqbal, S. & Sholihin, M. (2018). The role of cognitive moral development in tax compliance decision-making: an analysis of the synergistic and antagonistic tax climates. International Journal of Ethics and Systems, 35(3), 461-492.
Jeffrey, C., Weatherholt, N., & Lo, S. (1996). Ethical development, professional commitment and rule observance attitudes: a study of auditors in Taiwan. The International Journal of Accounting, 31(3), 365-379.
Khurana, I. K., & Raman, K. K. (2004). Litigation risk and the financial reporting credibility of big 4 ve rsus non-big 4 audits: evidence from Anglo-American countries. The Accounting Review, 79(2), 473-495.
Kish-Gephart, J. J., Harrison, D. A., & Treviño, L. K. (2010). Bad apples, bad cases, and bad barrels: Meta-analytic evidence about sources of unethical decisions at work. Journal of Applied Psychology, 95(1), 1-31.
L-Aidaros, A., Ghani, H. A. A., & Idris, K. M. (2014). The consistency between prescriptive and Deliberative accountants’ moral reasoning: case in Yemen. International Review of Management and Business Research, 3(4), 17-97.
Lari Dasht Bayaz, M., Salehi, M., & Zahedi, M. (2017). Dysfunctional auditor behavior and working relationships with supervisors, managers moderating role of ethical climate. Journal of Value & Behavioral Accounting, 2(3), 111-146. (in Persian)
Maranjory, M. (2020). Identifying and ranking the marketing strategies in auditing professionAccounting and auditing review, 27(1), 114-131. (in Persian)
Mingzhi, L. (2013). Effect of guanxi and ethical orientations on Chinese auditors' ethical reasoning. Managerial Auditing Journal, 28(9), 815-837.
Mohseni, A., Ghasemi, M., & Karami, M. (2018). A study of the relationship between personality traits and auditors ethical intention. Journal of Management Accounting and Auditing, 24(6), 177-190. (in Persian)
Morris, J. (2014). The impact of authentic leadership and ethical firm culture on auditor behavior. Journal of Behavioral Studies in Business, 7(1), 1-32.
Mousavi, Z., & Mohseni Kabir, Z. (2019). Investigating the impact of organizational silence on the professional and ethical performance of auditors. Journal of Value & Behavioral Accounting, 4(7), 135-180. (in Persian)
Musbah, Y., Christopher, C., & Tyfa, T. (2014). The role of individual variables, organizational variables and moral intensity dimensions in Libyan management accountants’ ethical decision making. Journal of Business Ethics, 134(3), 1-24.
Namazi, M, & Ebrahimi, F. (2018). Investigating the effect of personal and social factors on the perceived moral intensity by accountants. Journal of Value & Behavioral Accounting, 2 (4), 97-121. (in Persian)
Nasiri, M. (2008). A look at Kohlberg's theory of moral development. Religious & Research Quarterly, 132, 125-134. (in Persian)
Naslmosavi, S., Sofian, S., &Saat, M. B. (2013). The effect of audit firm size on independent auditor’s opinion: conceptual framework. Asian Social Science, 9(9), 243-248.
Nasution, D., & Östermark, R. (2019). The impact of auditors’ awareness of the profession’s reputation for independence on auditors’ ethical judgement. Social Responsibility Journal, ahead-of-print, DOI: 10.1108/SRJ-05-2018-0117.
Palmrose, Z. V. (1988). Competitive manuscript co-winner: an analysis of auditor litigation and audit Service quality. The Accounting Review, 63, 55-73.
Pierce, B., & Sweeney, B. (2010). The relationship between demographic variables and ethical Decision making of trainee accountants. International Journal of Auditing, 14(1), 79-99.
Ponemon, L. A. (1992). Ethical reasoning and selection-socialization in accounting. Accounting Organizations and Society, 17(3/4), 239-258.
Ponemon, L., & Gabhart, D. (1993). Ethical reasoning in accounting and auditing. Canadian General Accountants’ Research Foundation, Vancouver.
Ponemon, L.A. (1990). Ethical judgments in accounting: a cognitive-developmental perspective. Critical Perspectives on Accounting, 1(2), 191-215.
Rest, J. R. (1993). Guide for the defining issues test. Center for the Study of Ethical Development. Minneapolis.
Sarlak, N. (2008). Ethics in accounting, Journal of Ethics in Science and Technology, 3(1-2), 71-82. (in Persian)
Shahbazi, M, & Mehrani, K. (2020). Design a model for auditor's professional judgment. Accounting and auditing review, 27(1), 60-86. (in Persian)
Siahkalroudi, M., Feizi, T., Rasoli, R., & Hozoori, M. (2015). Identifying the factors affecting on Payame Noor University managers' ethical decisions. Journal of Public Administration, 7(2), 525-546. (in Persian)
Sun, J., & Liu, G. (2011). Client-specific litigation risk and audit quality differentiation. Managerial Auditing Journal, 26(4), 300-316.
Tahriri, A, & Piri Sagharloo, M. (2016). Auditors’ perceptions of professional skepticism in audit work. Accounting and auditing review, 1(23), 117-135. (in Persian)
Thorne, L. (2000). The development of two measures to assess accountants’ prescriptive and deliberative moral reasoning. Behavioral Research in Accounting, 12, 139-169.
Thorne, L., Massey, D. W., & Magnan, M. (2003). Institutional context and auditors’ moral reasoning: A Canada-US comparison. Journal of Business Ethics, 43(4), 305-321.
Trevino, L. K., & Brown, M. E. (2004). Managing to be ethical: debunking five business ethics myths. Academy of Management Perspectives, 18(2), 69-81.
Tsui, J. S. (1996). Auditors’ ethical reasoning: some audit conflict and cross cultural evidence. The International Accounting, 31(1), 121-133.
Weber, J. (2017). Understanding the millennials’ integrated ethical decision-making process: assessing the relationship between personal values and cognitive moral reasoning. Journal of Business and Society, 58(8), 1671-1706.
Yakobus, K. B., & A. Marselinus. (2017). Auditor ethical decision making. Scientific Research Journal, 5(6), 27-45.