| The existence of earnings management, the intentional biasing of reported earnings to achieve some intended objective, is widely documented in the accounting academic literature. However, little research focuses on the personal and environmental influences on the behavior of corporate accountants that leads to earnings management activity. The purpose of this study is to experimentally investigate the influences of three potential determinants on earnings management: moral reasoning, earnings pressure, and likelihood of detection.;The study utilizes a between-subjects experiment with a fully crossed design, including two manipulated variables, earnings pressure and likelihood of detection, one individual difference variable, moral reasoning, and a covariate, social desirability bias. Seven hypotheses are developed and tested: the three main effects of the independent variables, three first-order interactions, and one second-order interaction among the selected determinants. Data are collected from a sample of 130 corporate accountants from 31 divisions of six large, multi-division corporations.;Results indicate that earnings pressure strongly influences earnings management behavior, but corporate accountants are not deterred by likelihood of detection from engaging in earnings management activity. The influence of level of moral reasoning of corporate accountants on earnings management, as measured by the absolute value of the dependent variable, is significant, as well. No support is found for the predicted interaction effects. The covariate, social desirability bias, also significantly influences the absolute value of the response.;The results suggest that corporations which exert strong pressure to achieve earnings targets will experience managed earnings. In addition, neither the likelihood of audits nor the presence of strong corporate controls appear to deter earnings management in the presence of earnings pressure. The evidence suggests that the corporate accountant's level of moral reasoning also plays a role in the accountant's decision to engage in managing earnings.;This study responds to the call for research on the ethics of management accountants by extending moral reasoning research to corporate accountants. Furthermore, the present study is one of the first involving accounting ethical issues to measure and control for social desirability bias, a response risk when sensitive questions are asked of human subjects. |
