The Role of Individual Variables, Organizational Variables, and Moral Intensity Dimensions in Accountants’ Ethical Decision Making: A Study of Management Accounting in Libya

Over the last few decades the business environment throughout the world has seen several
accounting and corporate scandals such as the collapse of Enron, Arthur Andersen, WorldCom, and Parmalat. As a result of these ‘scandals’, significant attention has been directed to the issue of ethics in business in general, and in accounting in particular. Several empirical studies have been conducted on the subject of ethical decision making and ethical issues within accounting. Interestingly, most of this research has been done in the USA and the remaining has been conducted mainly in developed countries. Although some of the ethical decision making research has been done in accounting, very little research has been conducted in the area of management accounting. This study addresses this gap by adding empirical evidence related to the association of numerous variables with management
accountants’ ethical decision making in one of the developing countries, namely Libya.

The purpose of this study is twofold; first, to investigate the impact of those variables
(individual variables, organizational variables, and moral intensity dimensions) on the ethical
decision making of management accountants and future accountants (i.e. accounting students)
in Libya; and second, to determine what types of ethical issue are faced by Libyan management accountants at their workplace. The ethical decision making model adopted in this study hypothesizes that individual variables (e.g., age and gender), organizational variables (e.g., code of ethics and ethical climate), and moral intensity dimensions (e.g., magnitude of consequences) have relationships with the first three stages of ethical decision making (recognition, judgment, and intention) as constructed by Rest (1981). Adopting a cross-sectional methodology, a questionnaire that included four scenarios was used to gather data from a sample of Libyan management accountants and accounting students. Using several advanced statistical techniques (e.g., One-way ANOVA and Hierarchical Multiple Regression), data was analysed and the study hypotheses were tested.

The results of this study reveal that, among all the variables examined, personal moral philosophy dimensions had the strongest significant relationship with the three stages of ethical decision making for both samples. Also, moral intensity dimensions explained a significant portion of the variance in management accountants’ ethical decision making stages, whereas only the ethical intention stage of accounting students was significantly associated with moral intensity dimensions, temporal immediacy in particular. Moreover, while no significant relationships were found in relation to the impact of all organizational variables examined, very few significant results were found related to the impact of age, gender, and educational level on ethical decision making stages. Also, Libyan management accountants recognized several issues that have been found in other countries, including the issues of injustice in distributing the company’s resources within companies, the misuse of the company’s equipments, and managers’ use of power to serve personal interest. Encouraging idealistic philosophy and giving more attention to ethics in accounting education are some of the implications of this study. Future research should apply other methods (e.g., interview) to investigate ethical issues in management accounting, including other dimensions of moral intensity and ethical climate components, and include samples from developing countries, especially Muslim countries.