| The reward structures of public accounting firms have received limited attention in the behavioral accounting research literature. The goal of this study is to examine the effects of two economic elements of these reward structures on reporting behavior. The study provides a general model that incorporates the independent variables of time budget importance and salary structure, and the psychological construct of ethical ambivalence as a mediator between the independent variables and the dependent variable of reporting behavior. This model is tested in a computerized experiment that involved 124 subjects in a simulated audit task, representative of tasks commonly assigned to audit staff in public accounting firms. The general model is based on a framework that incorporates ethical ambivalence theory and expected utility theory to explain how the conflict resulting from a reward structure that offers high incentives to a staff auditor to meet an unattainable time budget may result in feelings of ethical ambivalence, and how such ambivalence may result in the behaviors of underreporting the number of hours worked and signing off on incomplete audit procedures.;The results of this experiment, generated from a LISREL path analysis, support the predictions of the model. The data show that time budget importance has a positive, significant effect on ethical ambivalence levels, that a straight salary structure has a significantly more positive effect on ethical ambivalence levels than does an overtime salary structure, and that ethical ambivalence has a positive, significant effect on the tendency to engage in dishonest reporting behavior. |
