Ethical Theory

managerial Auditing diary Emerald Article On respect open guess in auditing Lutz Preuss Article information To cite this chronicle Lutz Preuss, (1998),On honourable theory in auditing, managerial Auditing ledger, Vol. 13 Iss 9 pp. ergocalciferol 508 Permanent standoff to this document http//dx. doi. org/10. 1108/02686909810245910 D mastertestloaded on 25-11-2012 References This document fiddletains references to 47 other documents Citations This document has been cited by 2 other documents To feign this document emailprotected com This document has been transfered 2432 times since 2005. *Users who downloaded this Article in addition downloaded * Gary Pflugrath, nona Martinov-Bennie, Liang Chen, (2007),The impact of codes of everlasting(a) philosophy and experience on auditor judgments, managerial Auditing diary, Vol. 22 Iss 6 pp. 566 589 http//dx. doi. org/10. 1108/02686900710759389 Beverley Jackling, Barry J. Cooper, Philomena Leung, Steven Dellaportas, (2007),Pr ofessional chronicle bodies perceptions of ethical issues, ca physical exercises of ethical failure and lessonity tuition, managerial Auditing Journal, Vol. 22 Iss 9 pp. 928 944 http//dx. doi. org/10. 1108/02686900710829426 Douglas E.Ziegenfuss, Anusorn Singhapakdi, (1994),Professional Values and the ethical Perceptions of Internal Auditors, Managerial Auditing Journal, Vol. 9 Iss 1 pp. 34 44 http//dx. doi. org/10. 1108/02686909410050433 Access to this document was granted through an Emerald subscription provided by ASTON UNIVERSITY For Authors If you would like to save up for this, or whatsoever other Emerald macrocosmation, so please engross our Emerald for Authors service. Information most how to choose which unrestrictedation to write for and submission guidelines argon available for each(prenominal). Please visit www. emeraldinsight. om/ occasions for more information. About Emerald www. emeraldinsight. com With over forty years experience, Emerald root Publish ing is a leading independent publisher of global research with impact in business, ships company, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an lengthy range of online products and services. Emerald is twain COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. Related playtent and download information correct at time of download. On ethical theory in auditing Lutz Preuss Lecturer, Heriot-Watt University, Edinburgh, UK This expression discusses slipway of self-aggrandizing support to auditors in addressing chaste dilemmas. Codes of Ethics argon very great in this circumstance unless ar in the ? nal analysis insuf? cient devices, because their necessarily generalised form has to be translated into the speci? c stead and thusly studys acceptance sooner t han merely adherence. Codes make believe to be complemented with developed ethical argument of storyants.Hence, several(prenominal) ethical article of faiths argon discussed which have been utilize to invoice in the recent literature, i. e. utilitarianism, deontology, virtue ethical motive and ethics of c are. Unsurprisingly, n whizz emerges as giving completely satis eventory solutions. Yet eclecticism end be avoided by using unite precedents, which combine respective(prenominal) principles to provide reasonably comprehensive cover of decision-making in a business context. As in any other art, practitioners of be, be they public accountants, management accountants or innate auditors, whitethorn face goodisticistic dilemmas in their work.In mapping out the ? eld of potentially con? icting interests, the set up of Chartered Accountants of Scotland (1997, p. i), the oldest professional body in the UK, stipulates The primary duty of the lay down of Chartered Account ants of Scotland is to the public. This principle determines its emplacement as a professional body . The ICAS (1997, p. vii) requires that In addition to the duties owed to the public and to his or her employer, a member of the Institute is bound to observe high standards of conduct, which whitethorn sometimes be contrary to his soulfulnessal self-interest.The author would like to thank Professor Gerald Vinten, editor of Managerial Auditing Journal, and Stephen Morrow, Department of Accountancy and Finance, Heriot-Watt University, Edinburgh, for their helpful suggestions. Managerial Auditing Journal 13/9 1998 five hundred508 MCB University Press ISSN 0268-6902 The public accountant is the con? dential gene of the community at large, but the public does not (re)appoint auditors (for speci? c clean-living dilemmas facing foreign auditors, see Gunz and McCutcheon, 1991 Moizer 1995 Finn et al. , 1994).Management accountants and internal auditors are employees of the corporatio n hence their employment position whitethorn collide with their professional values. They likewise have a responsibility to society comparable to an engineers concern for public safety and are require by the Institute of Chartered Accountants in England and Wales to observe the homogeneous standards of behavior and competence as take to to all other members (Statement 1. 220, quoted in Maurice, 1996, p. 184). Ethical dilemmas tend to be complex and totally hazily de? nable.In history system, object lesson agency frequently throw states a question of causation (Moizer, 1995, p. 425f. ), as the content of an audit tarradiddle may not have an obvious assort with a speci? c result if an auditor quali? es a participations accounts, has he actually caused an ensuing bankruptcy? Furthermore, the very subject matter of accounting is such that twain equally objective accountants may r to each one several(predicate) results. The more or less visible rejoinder by all pr ofessional account statement bodies has been to set up codes of ethics, e. g. by the Institute of Internal Auditors in 1968.Their very existence sets limits for immoral behaviour and offers guidance in ambiguous situations. Studies of members of the Institute of Internal Auditors (Siegel et al. , 1995 Ziegenfuss and Singhapakdi, 1994) prepare that a clear majority do use the code of ethics in their work. It is seen primarily as an instrument for giving guidance in moral dilemmas (64 per cent) rather than a means to enhance the professions public perception (16 per cent). Research by Dittenhofer and colleagues offers an insightful longitudinal billet nto changing moral beliefs of internal auditors in the light of the IIA Code of Ethics. In 1982 Dittenhofer and Klemm (1983) presented a random sample of IIA members with 20 vignettes, each describing morally contentious issues, and asked respondents to indicate their re execute, ranging from dismissal of the person to doing nothing b ecause no ethical problem is perceived to exist. In 1994 Dittenhofer and Sennetti (1995) repeated the survey, again sampling IIA members. In galore(postnominal) cases the authors found signi? smoket changes, with IIA members having become more critical and supporting harsher action.So the proportion of respondents who claim they would dismiss an internal audit supervisor who engaged in insider reporting (situation 4) has risen from 50. 1 to 63. 0 per cent, with particularly large increases for trainees/journeymen (+70 per cent), in the stratum stave shell outation, and insurance (+40 per cent) in the category employers activity . However, some cases arguably less pixilated ones have shown little change over the decade or even a decline. In any case, in that respect were no signi? locoweedt differences in terms of gender or age groups.Most astonishing, so Dittenhofer and Sennetti claim, was the fact that for each scenario almost the complete spectrum of attitudes was repr esented, which indicates that there is no consensus among internal auditors as to what is right or wrong. Codes of ethics are not sufficient to resolve moral dilemmas. For a start, violations of codes have persisted (Finn et al. , 1994 Loeb, 1971 Pearson, 1987). A distinction has to be made betwixt acceptance of a code and mere adherence to it (Loeb, 1971), which may stem from a strong musical arrangemental climate or a fear of being penalised.Furthermore, codes in their usualised form, stopnot cover all eventualities. Analysing Dittenhofer and 500 Lutz Preuss On ethical theory in auditing Managerial Auditing Journal 13/9 1998 500508 Klemms (1983) research, Vinten (1996, p. 56) found a cardinal-fold problem for some scenarios clearly morally contentious ones it was unclear exactly which article of the IIA Code utilize and also what response the Code required. Swanda (1990) and Vyakarnam et al. , (1996) found that accountants isplay a tendency to revert to adept knowledge when facing ambiguous moral situations. Hence Mintz (1995) argues that accountants film both technical and moral expertise as well as the intention and ability to act against self-interest if moral philosophy requires doing so. Vinten (1990, p. 10) sees three types of codes 1 a regulatory code, such as the Ten Commandments. It establishes a complete overlap between behaviour and code, which is furnished with such a compelling ethical imperative that further discussion is n any needful nor asked for.It does, however, not recognise shades of grey . 2 an aspi reasonable code, such as the science literature in the Jewish Scriptures. It provides the standard a person should aspire to but recognises that full compliance may rarely be possible. Yet it provides little help in weighing up alternative courses of action. 3 an educational code this holds rules and regulations to be unhelpful if not damaging and instead stresses the importance of the one-on-one conscience in a profession al situation.The unsatisfactory nature of codes of ethics, Vinten suggests, may stem from the predominance of the regulatory model. It emerges that de? ning ethics as the rules of conduct recognised in the human life department of the practice of professional accountancy (Maurice, 1996, p. 9) is to a fault limited. Codes of ethics have to be reinforced with moral development of accountants. Thus researchers have studied the status quo of moral development in the profession (Finn et al. , 1994 of certi? ed public accountants, Ziegenfuss et al. , 1994, of internal auditors and management accountants).Some authors have then discussed possible improvements of moral development within Lawrence Kohlbergs framework for cognitive moral development (Lovell, 1995, 1997 Sweeney and Roberts, 1997). Others have sought to clarify how far individual ethical theories and principles are applicable to accounting dilemmas, although the discussion has often been limited to utilitarianism and deontolog y (Maurice, 1996 Moizer, 1995). Only over the last few years have alternative ethical theories been applied to accounting (Mintz, 1995 Francis, 1990 Oakes and Hammond, 1995 Reiter, 1996, 1997).The aim of this article is to draw the discussion of these ethical theories and principles together into a comprehensive system, where the advantages and disadvantages of individual principles are highlighted. Following Hartman (1994) ethical theories shall be understood less as prescription for action than as tools for understanding complex situations. 1. Utilitarian ethics Teleological or consequentialist ethics judges the rightness or wrongness of an act by its consequences. The most elaborate consequentialist theory is that of utilitarianism, as propagated by Jeremy Bentham (1789/1962).In the de? nition of his disciple buns Stuart Mill (1861/1962, p. 257) Utility, or the Greatest Happiness Principle holds that actions are right in proportion as they tend to promote happiness, wrong as the y tend to produce the reverse of happiness. Utilitarianism is a strongly classless theory as every individual is to be devoted as much consideration as anybody else is. It should be pointed out that Bentham saw this principle not as a watertight moral theory but as a tool for political decision making. Utilitarianism faces obvious virtual(a) problems in its moral arithmetic.Mill introduced a distinction between higher and lower pleasures, yet it is still far from clear how different pleasures of different intensities goat be summed up, how a strong immediate desire compares with a life-long moderate one, and so forth Agents may lack sufficient time to calculate all the consequences or may overestimate their own sufferings and underestimate somebody elses happiness. This kind of criticism can partly be averted by applying the principle of utility not to single acts, act-utilitarianism, but to classes of acts, rule-utilitarianism.Under rule-utilitarianism an act is morally obligat ory if it falls into a category of acts, which in their collectivity tend to produce more happiness than pain. It is no longer necessary to know all the implications of an action one can rely on past evidence to get a slightly accurate account of an acts potential consequences. Rule-utilitarianism is applied in a council recommendation by the Institute of Chartered Accountants of Scotland issued in 1971 (quoted in Moizer, 1995, p. 422), which recommends that members hould not disclose past or intended civilized wrongs, crimes or statutory offences unless they feel the damage to the public probable to arise from non-disclosure is of a very safe nature. 501 Lutz Preuss On ethical theory in auditing Managerial Auditing Journal 13/9 1998 500508 Rule-utilitarianism, however, can be shown to collapse into act-utilitarianism, if one follows the rule in situations of type x, do y or some(prenominal) else maximises utility (Smart, 1967). Also, the difficulty or perhaps impossibilit y of a moral calculation has not been solved.Since utilitarianism is to consider all consequences of an action, this includes not only consequences for yet unborn generations but also side effects the agent has not brought about actively, and these may well overshadow intended consequences. Intuitively, one would hesitate to blame a moral agent on this tail end. Utilitarianism in accounting Utilitarianism has two advantages over alternative ethical theories for practise in business. It colligate self-interest with moral behaviour, and a company is per de? nition self- provoke. Secondly, the calculation of bene? and harm is similar to pro? t and loss accounting and hence more likely to ? nd acceptance with business practitioners than bear on ethical theories. By default, utilitarianism is the most in? uential ethical theory in the business context. Most frugal and ? nance concepts are implicitly or explicitly built on the assumption that individuals are interested in maximising before long-term self-interest. A resulting intellectual parenthood of accounting theory and methods in utilitarianism becomes significant in the surround over the neutrality of accounting information.Neutralists, like Solomons (1991), argue that it is not the task of accountancy to be an agent of change in society Accountants should merely convey . unbiased information, on which users can then base their decisions. Radical accountants, such as Tinker (1991), have questioned whether accounting information can actually be neutral. As accounting is embedded in social reality it is neither inexplicably given nor a straight re? ection of social reality and in social con? ict, its theory and methods unavoidably favour one side of the con? ict over another. Thus Lovell (1997) ? ds it problematic that accounting concepts are often presented as neutral or even as morally correct, without pointing out their roots in utilitarian thought. There is evidence (Gray et al. , 1994 Lovell, 199 7 Ponemon, 1992) that accounting and other means of organisational contain compress moral reasoning within the lowest stages of Lawrence Kohlbergs (1981) hierarchy of cognitive moral development. Kohlberg sees moral development progressing from an instrumental use of other persons via the acceptance of a social order to abstract principles which, if necessary, over- ride human laws.Where accounting supremacy is assumed to work because people do not want their underperformance to be detected, a stage one motivation exists. Linking acceptable performance to ? nancial bonuses assumes a stage two motivation. At stage three a person performs as required because she wants to win or maintain the respect of colleagues, a stage quaternity motivation shows in a belief that the law, either respective state laws or the organisational laws, are to be obeyed for their own sake (Lovell, 1997, p. 155). On the other hand, inasmuch as it prevents illegal or immoral practices, accounting control do es have a moral quality . . Deontological ethics Deontological ethics center ones on duty or moral obligation, deon being the Greek word for duty There are various deontological con. cepts, such as Do unto others as thou wouldst have them do unto you, but the most rigorous version was developed by Immanuel Kant (1785/1898). He sees a sharp difference between self-interest and morality and proposes that an action only has moral value if it is performed from duty Kant proposes his . Categorical Imperative (1785/1898, p. 38). Act only on that maxim whereby thou canst at the same time will that it should become universal law.A different version of the Categorical Imperative reads (1785/1898, p. 47) . So act as to contend humanity, whether in thine own person or in that of any other, in every case as an end, never as means only . A maxim, a rational principle, which underlies an action, has to ful? l two criteria to become universally binding ? rst it has to be shown that the maxim can be universalised without contradiction. rift promises if the disadvantages outweigh the bene? ts is not universalisable, because if it was nobody could rely on anybody utter the truth anymore.Secondly, one has to show that a rational agent ought to will the maxim, i. e. that it actually creates conditions which are conducive to human life. Some actions, however, are universalisable but nonetheless seem wrong a religious fundamentalist may reason it necessary to treat opponents in horrendously brutal ways and accept that he would be treated in the very same fashion if he were in the opposing camp. Other cases are not universalisable but do not seem morally wrong universal contraception would bring humanity to an end but to most people it does not seem wrong in individual cases.Furthermore duties, imposed by 502 Lutz Preuss On ethical theory in auditing Managerial Auditing Journal 13/9 1998 500508 several categorical imperatives, may clash here the principle offers no further sol ution. On the other hand, Kantian morality links with popular conceptions of morality, e. g. that some actions simply are never permissible, whatever the gain to individuals or society . The link between morality and the will of the agent allows us to praise people for their intentions even if the results fall short of expectations.A deontological set about is also the most master(prenominal) basis for criminal law. Deontology in accounting A deontological perspective underlies much of the self-regulation in accountancy, see for instance the explicit requirement by the Auditing Practices Committee in the US on qualifying a companys accounts on a going concern basis (Moizer, 1995, p. 424) The auditor should not refrain from qualifying his report if it is other than appropriate, merely on the grounds that it may lead to the appointment of a receiver or liquidator. rong, even if it prevented a major disaster image the protracted debate on the evaluation of whistleblowing (Vinten, 19 94), where accountancy bodies for a long time held that concerned employees may raise their concern to superiors but must not under any circumstances report to outsiders without authorisation. A strong deontological emphasis has the disadvantage that compliance with rules is taken to be moral. One feels as an accountant, give tongue to a participant in a study by Vyakarnam et al. (1996, p. 159) that there are so many rules and regulations that anything outside is acceptable. A consensus to work just above the required minimum can lead to a situation where the minimum becomes expected and push increases to drop standards further. 3. Virtue ethics In line of products to the universal emphasis on moral duty in deontology and on general happiness in utilitarianism, Aristotle emphasises the importance of a persons character for morality He suggests that the highest . human right-hand(a) is happiness, not in a crude material sense, but in a comprehensive meaning which carries connota tions of ? ourishing and well-being.This highest respectable is closely linked to the function of a human being, which is to obey reason, as this is the main characteristic to set domain apart from other living beings. As a good ? autist plays the ? ute well or a good knife cuts well, Aristotle argues, so a good human is good at applying reason. Acting according to good reason is the distinguishing feature of virtuous behaviour. Reason helps to avoid both excess and de? ciency so the virtue of bravery shows the healthy mean between cowardice and rashness. To acquire this kind of virtue, people need practical wisdom, which can only be acquired by experience and habituation.Aristotle (1985, trans. Irwin) de? nes that the virtue of a human being will be the state that makes a human being good and makes him perform his function well (1106a20-24). Virtue ethics distinguishes between internal and external rewards, a distinction utilitarianism cannot make. Internal goods emerge from s peci? c practices. They can only be experienced after a long engagement in the practice and their achievement bene? ts the building block of the community External goods are . not uniquely related to any practice they are an individuals property and are objects of competition.Thus, when Turner revolutionised the painting of sky and clouds, he created an internal good, irrespective of This clear, deontological witness is necessitated by the public role of the accountancy profession which requires it to place above any other the public interest in being informed of the auditors doubts about the ability of the company to continue trading. There may be individual cases where an auditor, after considering the consequences of a quali? cation, would want to give the company a clean account the more since a quali? cation is only a weak indication of business failure.The case of BCCI, Moizer (1995, p. 429) argues, has shown the danger in taking such an act-utilitarian entree. BCCIs audito rs Price Waterhouse considered qualifying the accounts in April 1990 but reasoned that auditors owe a duty to shareholders to consider very carefully the possible impact of their report because a quali? ed report would have more dramatic consequences for a bank than for an industrial concern. BCCIs accounts were not quali? ed, and the bank was able to trade for another 14 months before it ? nally collapsed in July 1991. Moizer (1995, p. 30) concludes that the professions Code, which is based on either deontological or rule-utilitarian approaches, must be followed without regard to the particular situation auditors ought not to consider the consequences of their actions, since they have already been evaluated for the profession as a whole. Deontological ethics is uncompromising by de? nition, but the complete slight for circumstances can lead to morally dubious requirements. Few would follow the Kantian notion that telling a lie should always be 503 Lutz Preuss On ethical theory i n auditing Managerial Auditing Journal 13/9 1998 500508 he external goods, such as fame and income, he attained too (MacIntyre, 1985, p. 190f. ). Virtues and accounting Virtue ethics considers both intention and outcome, where duty-based ethics and utilitarianism only see one it also links morality with self-interest. Principle-based ethics rarely ever gives unambiguous advice it faces counter-examples, sometimes its conclusion runs counter to moral intuition. Virtue ethics, on the other hand, recognises that there are no easy answers and stresses the importance of practical wisdom in dealing with a moral dilemma.Mintz (1995, p. 259) argues that virtues enable accounting professionals to resolve con? icting duties and loyalties in a morally appropriate way because they provide the inner strength of character to withstand pressures that might otherwise overwhelm and negatively in? uence professional judgment in a relationship of trust. He sees two virtues as having particular importa nce for the accounting profession, integrity, which enables the auditor to maintain objectivity under competitive pressure and trustworthiness, which ensures public con? ence in a professional service. The notion of virtuous behaviour in accounting is again linked to the discussion of the neutrality of accounting information. The neutralist perspective (Solomons, 1991) sees a clear distinction between the accountant as accountant and as citizen, and only in the latter capacity can the person legitimately express concern over social issues. Tinker (1991, p. 305), however, sees a social world where roles are inextricably intertwined and con? icting, and where the individual needs to develop a social selfconsciousness for transcending con? cts. The same accounting individual often appears on several sides in the same dispute, and without self-awareness about her role interdependencies, may in the end contribute to her own repression and exploitation wisdom, which differs from the rout ine application of rules, such as those by the professional bodies. Furthermore, the use of computer-aided decision models does actually remove the possibility of developing virtuous behaviour. The main drawback of virtue ethics lies in its relativism (Hartman, 1994).Aristotles de? nition of virtue as a mean between two extremes makes sense to all communities, but only in a formal way The communities decide . what the two extremes are, and by this what the mean is. Hence, there is no neutral objective standpoint from which a good community can be rarified from bad ones. Most humans belong to a number of communities, the community of their employer, their family, a sports club. There can be diverging de? nitions of community, which lead to diverging conceptions of the required virtues.A management accountant may take her employer to be her community and rate loyalty to it higher than loyalty to the general public. There are also practical problems with virtue ethics. Stressing the i mportance of character and practical wisdom does not already give concrete advice. The focus on character also neglects forefinger distribution in organisations it may actually disguise power structures and prevent change. The rich language of virtue ethics also lends itself for PR exercises. 4. Ethics of care The ethics of care has been developed as a feminist critique of the traditional moral philosophy on the basis of rights and rules.Traditional ethics is grounded in a view of others as potentially dangerous thus rights become an important means to underscore claims against others and rules are needed to settle con? ict. The moral responsibility arising from both rights and rules is universal it binds all moral agents equally (cf. the principle of utilitarianism or Kants Categorical Imperative) but makes the individual person replaceable without any loss to the ethical principle. libber authors have contended that the ethics of rights is essentially a male perspective and re? cts male dominance in western society and thought. Gilligan (1982) argues that female morality does not centre on abstract principles but contextualises moral responses by drawing on in the flesh(predicate) experiences. It focuses on adequate responses to the needs and concerns of close individuals. Feminist philosophers see the self as being heady by its relationship with others Francis (1990) sees three main obstacles for more virtuous accounting. First, the relationship between internal and external rewards is slanted heavily towards the latter. The virtue integrity may be compromised by the bene? s of retaining a client. Secondly, the organisation of accounting into a small number of large private companies may hamper the development of virtuous professional norms. Under the prevailing competitive pressure the profession has demonstrated a lack of solidarity which has manifested itself particularly in auditor switching. Thirdly, virtues require the application of practical 50 4 Lutz Preuss On ethical theory in auditing Managerial Auditing Journal 13/9 1998 500508 ( nary(prenominal)dings, 1984). Instead of bargaining between rational agents and rule-based settlement of con? ct, an ethics of care focuses on respect for others maintaining the relationship is valued higher than scoring a advantage or exercising ones right. Ethics of care and accounting An ethics of care has been applied both directly to the accounting profession and in the concept of a feel for organisation. Burton and Dunn (1996, p. 139) suggest that a company could be said to care if it exhibits caring behaviour arranged with ? rm policy. A company is here seen as a secondary caring agent, dependent on the primary caring actions of its organisational members. Liedtka (1996) ? ds that much of the present rhetoric about caring for customers or employees is just care-talk but suggests a caring organisation can be built. Apart from having caring employees, organisational support is crucial , because the organisation largely shapes the persons role within it and must also provide the resources for caring. Employees would be seen as central, because they are the people who deal directly with customers and thus ultimately determine the success or failure of the business. Reiter (1996) suggests that caring is a worthy trait for employees, especially in the service sector.A caring ? rm could enjoy a competitive advantage in capability-driven markets, because it engenders trust and reduces act costs. Reiter (1997) claims that an ethics of care can foster a better understanding of the be principles of the accounting profession, such as auditor independence. This independence is to be achieved by a number of critical rules which determine the relationship between auditor and client, yet true mental separation from the client would require the auditor to work in a social vacuum, and the rule-based approach can be seen as controlling The contextual perspective . f the ethi cs of care, Reiter suggests, provides the alternative metaphor of interdependence. This allows de? ning an appropriate balance of interests, on which users of accounting information could rely more than on the appearance of independence. Such thinking in? uenced the framework approach by the ICAEW (Maurice, 1996, p. 43). In accounting education, an ethics of care provides an important balance to rightsbased approaches. Reiter (1996, p. 48) discusses training material compiled by the American accounting system crosstie and Arthur Andersen and ? ds a tendency of the AAA approach to frame con? icts as moral dilemmas where the choice is between resignation and hopeless compromise of integrity. A win-win-situation, and above all a positive learning effect for accounting students, may be more likely to come from a care perspective, which focusses on understanding others situations and points of view and determining what can be through to maintain appropriate relationships between the se lf and others (1996, p. 48). An ethics of care can also impact on accounting research (Oakes and Hammond, 1995), e. g. y challenging the possibility of a disinterested neutral scholar and thus asking how the researchers experiences and perspective in? uence the choice of research question. The interconnectedness of accountant and society raises the question of how current accounting practice affects the lives of people, especially the economically disenfranchised. This in repeal challenges the assumptions regarding economic behaviour. The contextual approach of an ethics of care introduces a relativist element. This is not merely a practical problem for the accounting profession, in that accounting information may become less comprehensible to outside users.It indicates a deeper philosophic ? aw in the application of an ethics of care to economic life. Burton and Dunn (1996, p. 142) considered the dilemma of a company wanting to influence of lead acid batteries. Showing care for those that are close its local community the ? rm decides to recycle the batteries rather than dumping them. The dangers involved in handling the batteries suggest they are better not handled by workers in the US, again the company displays care for close stakeholders. But would recycling in Taiwan be a moral alternative? Burton and Dunn attempt to rescue the model by introducing A hybrid approach, ecommending that special circumspection be given to the least advantaged members of the moral community, e. g. that the ? rm applies the same employee protection measures in Taiwan as it would in the US, even though this is not mandatory However, exempting the least . advantaged stakeholder shifts the burden onto the second least advantaged, until they turn into the least advantaged and get exempted, etc. The relativist problem leads to a further paradox if others are all important in the de? nition of the self, then the self does not exist independently of these others.Wicks et al. , (1994, p. 483) de? ne a company as constituted by the network of relationships which it is involved in, yet as Burton and Dunn (1996) observed, this is close to the view of transaction cost economics. 505 Lutz Preuss On ethical theory in auditing Managerial Auditing Journal 13/9 1998 500508 5. Compound models of ethics So far ethical theories have been considered in isolation from each other. Unsurprisingly in view of the complex nature of moral issues, none offers a completely satisfactory solution to moral problems in accounting.However, an unsystematic application of ethical principles carries the danger of eclecticism, of a pick-and-mix ethics, where an agent could select the ethical approach most suitable to furthering his own aims. A more secure theoretical foundation can be found in compound models. Brady (1985) suggested a Janus-headed model of ethics, further developed in Brady and Dunn (1995), which combines deontological and utilitarian requirements and proposes that an action should only be carried out if it violates neither.Kantian deontology and utilitarianism should be seen as complementing each other Moizer (1995) found them to be the two dominant ethical theories in accounting rule making. A particular advantage of this compound model lies in its capability to capture both the universality of a situation, in the universalisability of Kantian deontology, and the particularity, via the utilitarian principle, for which, in order to calculate the greatest good of the greatest number, one must know the particulars of the situation (Brady nd Dunn, 1995, p. 394). Cavanagh et al. (1981) suggest a different version of a compound model, where an act would be unethical if it break any of the following principles (a) to optimise utility for all stakeholders involved (b) to respect the rights of the individuals concerned and (c) to be consistent with norms of justice. Later work by the three authors (1995) enlarged this model by asking (d) whether the a ct arises from an appetency to care, to a utility-rightsjustice-care model.The decision-maker should also take account of clashes between principles, as well as of overwhelming or incapacitating factors, which would justify overriding one of the ethical criteria (1981, p. 370). Cavanagh et al. (1995, p. 399) argue that the advantage of their model lies in its practicality it does not require business decisionmakers to handle abstract ethical principles but translates them into familiar norms, which then can be applied to concrete situations. Both models have had considerable in? uence in the business ethics debate they have been applied in case studies and business ethics textbooks.The utility-rights-justice model was even chosen by Arthur Andersen for its business ethics programme. The two teams of authors have spent a great deal of energy line of reasoning the practical applicability or capturing distinction of their respective models. However, the main problem lies in the legit imation of selecting components. The very existence of competing models and the enlargement of one (the authors also considered the inclusion of a ? fth element of virtue) raises doubt whether any universally acceptable composition of a compound model can be achieved at all. Cavanagh et al. 1981) made important concessions when they allowed for mitigating circumstances for decision-makers who are not fully in control of the situation. Furthermore, decision-makers, who have strong and reasonable doubts about the legitimacy of an ethical metre, can legitimately be excused from adhering to that criterion (1981, p. 371). noe of the two teams offers advice on how to resolve clashes between principles. Cavanagh et al. , (1981, p. 370) note that there are no well-de? ned rules for such clashes, they can be intractable only by making a considered judgment concerning which of the con? cting criteria should be accorded the most weight in the given situation. While the necessity of making such caveats is perfectly understood, nonetheless, a certain amount of unpredictability may result in the application of compound models. On the other hand, both models secure a reasonably complete coverage of the ethical terrain in business decision-making (Brady and Dunn, 1995, p. 386). Eclecticism in the alternative of compound models still guarantees a comprehensive range of ethical principles, which would not be the case for eclecticism in the selection of individual ethical principles.It should also be noted that the utility-rights-justice-care model allows for only one criterion to be set aside, having reasonable doubts about more than one would not longer qualify as legitimate. 6. Conclusion The discussion set out from a realisation that Codes of Ethics in accounting are an important but in the end insufficient device for addressing moral con? ict, thus stressing the need for moral development of the person. Individual ethical theories and principles have been discussed of which none emerges as an all-round favourite for giving advice in moral dilemmas.Yet between the Scylla of offering no advice at all and the Charybdis of eclecticism in the selection of ethical principles, a safe course can be steered under the guidance of compound models. These are composed of a number of competing principles and the conciliation of these in the 506 Lutz Preuss On ethical theory in auditing Managerial Auditing Journal 13/9 1998 500508 person of the decision-maker assures a moral quality to the decision. 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