Cultural Factors Affecting Tendency of Ethical Decision-Making by Accounting Students: An Empirical Study in Vietnam

Abstract

The purpose of this study is to look at the precise direction and magnitude of cultural elements such as education, gender, power distance, and risk-taking proclivity on ethical decision-making. Data was collected from 194 interviewees in three groups: general business students, accounting major students, and professional auditors in Vietnam. The path analysis is used to test the impact of cultural factors on ethical awareness, ethical judgment, and ethical intention in different dubious scenarios at the personal level as independent variables, intermediate variables, and moderating variables. The metric is the percentage of respondents who believe a particular behavior is unethical based on a set of ethical principles. The researchers used SPSS AMOS software to conduct a confirmatory factor survey to evaluate the convergent and discriminant validity of latent variables. The results show differences between the two groups of students and professionals on these measures, suggesting that all of the four factors have an effect on ethical decision-making. Based on research results, some recommendations are proposed related to the four factors to improve the ethics of future generations of auditors in Vietnam. This study also contributes to the theory of culture in particular and cultural interference in general in the field of accounting-auditing in Vietnam in the process of international integration.

1. Introduction

With an increasingly expanding and developing economic market as in Vietnam, auditors play an important role in maintaining the accuracy and transparency of the financial activities of companies which in turn boosts the smooth and efficient operation of the whole market. To accomplish their duty, auditors need to make decisions and suggest personal opinions about the data or the financial statement of the company. These viewpoints entail ethical risks, causing decision-makers to critically weigh ethical considerations before making a decision. So, what considerations might play a role in making such a decision?

Papers published around the world that examine the impact of cultural factors on audit decision-making are frequently conducted on a worldwide scale, excluding Vietnam. Tanner et al. (2019) developed and tested a scale called German Ethical Culture Scale (GECS) to support research in German-speaking countries. In Malaysia, the impact of an organization’s ethical culture, audit experience, and ethics training on an internal auditor’s ethical judgment was investigated by Ghani et al. (2021).

Meanwhile, the audit environment in Vietnam possesses the diversity of the above factors, allowing a similar study to be conducted within the country. The question to ask is how and to what extent cultural factors influence ethical decision- making. The research team hypothesized in turn the impact of each factor’s education, gender, power distance, and risk taking propensity on ethical decision-making. Then, build a model and analyze the results using the path method to conclude. The results of the study will be presented together with recommendations and directions for future research which will be presented in the last section.

The research objective is to clarify the influence of cultural factors on ethical decision-making in the field of accounting and auditing. To achieve the above general objective, the research project set forth the following specific objectives: First, clarify the theory of ethical decision-making in the field of accounting-auditing in particular as well as put it in the concept of business ethics in Vietnam in general. Second, determine the specific direction and extent of influence of cultural factors on ethical decision-making.

2. Literature Review and Hypotheses

Ethical decision-making refers to the process of evaluating and choosing among alternatives in a manner consistent with ethical principles. When making ethical decisions, recognizing and removing unethical options before choosing the most ethical one are important. Jones et al. (2003) synthesized and studied the influence of this model on audit, considering the relationship of these factors with personality, training and experience, national culture, ethical culture, and ethical level.

Ethical decision-making is an important factor in ensuring that accounting and auditing work is carried out with integrity and honesty. Fritzsche (2005) presented that a clear set of policies on ethical behavior will influence ethical decision-making. An ethical culture is the most significant deterrent to unethical behavior and pointed out that professional accounting firms, where output quality is difficult to measure, must rely on the operation of strongly recognized shared values to control opportunism and possible inefficiencies.

2.1. Risk-taking Propensity

Excessive risk-taking has been proven in previous studies to lead to a lack of ethics in important decisions (Michalowski & Kramer, 2003). His proclivity for taking risks may influence his judgments of two essential elements of moral intensity: the likelihood of effect and the extent of the consequences (Vinson et al., 2020). Individuals with a greater one are more risk-takers and may have a distorted sense of the likelihood of bad outcomes and their size.

Arnold et al. (2007), after inspecting accountants from 8 Western European countries, concluded that when uncertainty avoidance increases, ethical behavior increases significantly. Xu (2019) conducted experiments on 180 participants from Hong Kong, mainland China, Malaysia, and the UK and assumed that high risk-taking propensity reported a lower perceived probability of being detected, which drives dishonest behavior.

Sekścińska et al. (2021) investigated the role of self-control in risky financial decision-making showing that the reflection of self-control successes lowered people’s propensity to take financial risk while the reflection of failure incited people to take financial risks. This means that the mentality of success or failure of one’s person has an impact on their decision making, when they are under failure, they tend to take more risk in making decisions.

2.2. Gender

Social gender (gender), sometimes referred to as gender or gender identity, are characteristics related to the difference between masculinity and femininity. Depending on the context, these characteristics may include biological sex (i.e. male, female, or intersex), gender-based social structures (including gender roles and other social roles), or gender identity. In this study, the specific issue focused on is how biological differences affect the ethical decision-making of the auditor.

Prior documents suggest that gender influences individuals’ ethical behavior as well as their ethical decision-making processes (Bernardi & Guptill, 2008). For example, Stedham et al. (2007) showed that men often make choices based on objective opinions and clear criteria, while women often use relativistic perspectives to evaluate ethical situations.

Despite the uncertainty, earlier literature does suggest that females tend to be more sensitive to ethical issues than males. According to Taylor and Curtis (2011), females were less ready to whistleblow when the costs of reporting unethical behavior were substantial. As a result, gender will have an impact on our participants’ ethical decision-making, but we can’t expect a consistent pattern across circumstances.

2.3. Power Distance

In Hofstede’s cultural dimension theory, power distance is defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. When studying cultural variables, power distance is also the factor most studied by researchers because they predict a strong relationship between ethical behavior and this factor (Arnold et al., 2007; Aryanti & Adhariani, 2020). Specifically, the authors argue that power distance has important ethical implications as a large power distance can lead to an individual not wanting to report unethical behavior from superiors while a low power distance may encourage reporting of such unethical behavior. Taylor and Curtis (2011) reported differences in the responses of US Public Accountants which confirm that perceived power distance is related to willingness to report unethical behavior.

In the context of Indian public sector organizations, Budhiraja and Modi (2021) attempted to empirically analyze the impact of a manager’s virtuousness and power distance on ethical behavior. One significant finding is that high power distance culture organizations have a higher association between virtuousness and manipulative behavior than low power distance culture organizations. Hence, high-power-distance organizations face a greater risk of manipulative behaviors.

However, Smith and Hume (2005) examined the power distance of accounting professionals from six countries and found that changes in perception of power distance do not affect ethical judgments. According to Hofstede (2016), most of the sampled countries have a low power distance ranking while Vietnam is assessed as having a higher rank, which leads to the potentiality of evaluating the effect of power distance on ethical decision-making. Elmoez et al. (2021) also have the same findings.

2.4. Education

Education is defined as the process of facilitating the learning or acquisition of knowledge, skills, values, ethics, beliefs, and habits.

Cohen et al. (2001) discovered few differences in awareness between two student groups, implying that their university business education had little impact on raising their ethical awareness. In the context of professional education, upper-level students are expected to have higher levels of perception, behaviors, and overall assessment of ethics about the actions taken in a particular situation compared to newly admitted students.

Ashill and Jobber (2013) researched the effects of experience on managerial decision-making uncertainty with a sample of senior marketing executives in New Zealand. It showed that the experience of each decision-maker has a differential impact on their tendency when they scan, interpret and respond to the change in the environment. Ghani et al. (2021) examined the impact of an organization’s ethical culture, audit experience, and ethics training on an internal auditor’s ethical judgment in a 46-branch bank in Malaysia. This study revealed that organizational ethical culture, audit experience, and ethics training can influence internal auditors’ ethical judgment.

However, Cohen et al. (2001) found that professionals judged some activities as much less ethical than graduating students. The findings demonstrate that the professional accountant prioritized utilitarian reasoning and deontology over justice. Hence, professional auditors are expected to differ from students in their ability to recognize ethical issues in dilemmas, and in their willingness to take unethical behaviors. Bagais et al. (2020) also have the same results.

Ozbek et al. (2015) pointed the impact of business ethics courses on the ethical perceptions and intentions of university students. They experimented with the difference between two groups of students: (1) attended a 10-hour course on business ethics and (2) did not attend. The results show that ethical awareness and intention significantly increased in the attended group while the other group showed no compelling difference. This means that education of ethical awareness has an important effect on the student’s tendency in the ethical situation, thereby influencing decisions containing ethical choices.

Furthermore, Vedel (2016) investigated variances in the Big Five personality groups across academic majors, finding that there is variation among students in different majors when the Five qualities are categorized - Neuroticism, Extraversion, Openness, Agreeableness, and Conscientiousness. This implies that the difference in the academic majors does have an impact on students’ mindsets. Accounting and auditing always require a high standard of business ethics along with many compulsory training courses of degrees, certifications.

Chen et al. (2012) investigated how the demand for achievement and education interact to influence the risk taking propensity of 230 entrepreneurs in a midwestern US state. According to the findings, entrepreneurs with a high need for achievement and higher education were more likely to take risks than those with a low desire for achievement and no higher education.

These hypotheses are derived from the preceding discussion as follows:

H1: People with a higher risk-taking propensity have a lower ethical awareness.

H2a: Gender differences have an impact on ethical awareness in the field of accounting and auditing.

H2b: Different gender influences risk-taking propensity, thereby indirectly affecting the ethical awareness in the field of accounting-auditing.

H3: Different power distances affect ethical awareness in the field of accounting and auditing.

H4a: Upper-level students have different ethical awareness levels compared to entry-level students.

H4b: Professionals have different ethical awareness levels compared to students.

H4c: Students majoring in accounting-auditing have higher ethical awareness than non-accounting students.

H4d: Education has an effect on risk-taking propensity

3. Research Methods

The sample was selected following the non-probability method. Based on the research group’s expectations for ethical decision-making and inherits the results from many previous studies (Cohen et al., 2001; Fleming et al., 2010), the authors conducted to identify the research sample as a group of people who are oriented to work in the accounting industry, divided into three groups: students studying general business, those studying accounting major and professional auditors in Vietnam. The sample results are presented in the table below (Table 1).

Table 1: Statistics on the Number of the Research Sample

The authors tested the hypotheses using the path analysis method (Figure 1). The effects of exogenous variables on endogenous variables and the effects of endogenous variables on endogenous variables are evaluated through regression coefficients. The relationships between the variables are indicated by arrows on the model. The direction of the arrow represents the direction of the effect of one variable on the other, with each relationship being a corresponding hypothesis.

Figure 1: Research Model

In which:

(1) Gender (GEN): Biological gender – male or female.

(2) Education (EDU):

• Auditors: Years of experience.

• Upper-level versus Entry-level students: Years of training at university.

• Specialized in accounting-auditing versus general business students: Majoring or not.

(3) Power Distance (PD): the questions designed by Curtis et al. (2012).

• PD1: The higher a person’s position is, the greater right he/she has to do whatever he/she wants.

• PD2: Norms require that I should not criticize my superior’s behavior.

• PD3: People should not question the actions of those in authority.

(4) Risk-taking propensity (RTP): The authors used four items to measure overall risk-taking propensity. Each item is measured on a 5-point Likert-type scale from 1-totally risk-averse to 5-totally risk- taking.

(5) Ethical Awareness (AWR): The authors use four statements as measures that reflect potentially constructive ethical judgment. Each item is measured on a 5-point Likert-type scale from 1 (unjust, unfair, not ethically right, and not accepted by the community) to 5 (just, fair, ethically right, and accepted by the community).

(6) Ethical Judgment (JUDG): The authors used a 5-point Likert-type scale from 1-strongly disagree to 5-strongly agree for each statement about ethical decision-making in each situation. We then reverse coded the scale item such that a lower (higher) score on this item is interpreted as a more ethical (unethical) assessment of the situation.

(7)Ethical Intention (INT): The variable was measured by a continuous scale of 101 points (0–100). The item reports that “What is the probability that you would take the same action?” for each situation. A higher (lower) score represents a greater (lesser) intention to act.

4. Results and Findings

4.1. Results of Confirmatory Factor Analysis (CFA)

The research conducted CFA using SPSS AMOS software to evaluate the convergent validity and discriminant validity between latent variables: PD and AWR. The results of the analysis are presented in Table 2 and Table 3.

Table 2: Measures and Path Estimates for Latent Variables

Table 3: Convergent and Discriminant Validity of Latent Variables

The AWR variable’s Average Variance Extracted (AVE) is 0.632, which is higher than the 0.5 requirements. Meanwhile, the AVEs for the PD variable are all approximately less than 0.5. This outcome is reasonable when the Composite Reliability is at an acceptable level (greater than 0.6). According to the Composite Reliability analysis results in the table above, this indicator is greater than 0.6 for the two variables AWR and PD. Furthermore, Cronbach’s alpha test findings exceed the 0.6 criteria, indicating that the two variables AWR and PD are suitable for investigation.

4.2. Pearson Correlation Analysis

Pearson Correlations of variables are presented in Table 4.

Table 4: Descriptive Statistics and Pearson Correlations Matrix

**Correlations in bold are significant at the 0.01 level (2-tailed).

The aggregated table shows that the majority of research samples are females (mean = 0.71), that RTP is average (mean = 3.30), that PD is average (mean = 2.59), that most of the actions in the given situations are unethical (mean = 2.37), and that INT is less likely to make similar decisions (mean = 30.34). The majority of the variables show a weak–average connection; however, AWR and JUDG, JUDG and INT, and AWR and JUDG, JUDG and INT are all substantially correlated, with values of 0.900 and 0.510, respectively. As a result, only intermediate variables will be taken into account in the path analysis.

4.3. Tests of Hypotheses with Path Analysis

The hypotheses predict that GEN, RTP, EDU, and PD will impact AWR. In addition, the research team predicts that the results will be consistent with the rule: ethical awareness precedes ethical judgment, then ethical intention, and ethical decision-making. From there, the group’s model is analyzed at several levels, as shown in the research model diagram in the hypothesis development section. The diagram below summarizes the relationship between the measured variables, with solid lines representing significant effects (Figure 2).

Figure 2: Results of Testing the Relationship Between Variables

Model results are shown in Figure 2 and Table 5, which have many significant direct and indirect effects. Path coefficients in the diagram are standard. The model for the hypothesis meets most of the relevant thresholds: The χ² statistic is significant (prob = 0.000 < 0.01) with the value of χ²/df is 2.607 less than 3, the value of CFI index is 0.950, which is greater than 0.900, NFI of 0.935 higher than 0.900, and RMSEA of 0.079 closes to the recommended threshold of 0.08.

Table 5: Path Analysis Results between Variables

Hypothesis H1 predicts that people with a higher RTP will have a lower AWR so that a sample with a higher RTP will perceive the decision as more ethical. A positive coefficient is understood that the students and auditors participating in the survey who are high risk-taking perceive actions taken in situations that are more likely to be just, fair, ethically right, and accepted by the community than participants who tend to avoid risk. With the analysis results of the path coefficient having a positive value (0.217) and the sig. Of 0.002 < 0.05, the group concludes that hypothesis H1 is supported.

Hypothesis H2 includes 2 predictions about the influence of GEN on AWR and ethical decision-making under direct and indirect effects. H2a predicts GEN has a direct effect on AWR, and the test results are completely consistent with this prediction. The path coefficient has a negative value, indicating that the female gender will be more interested and aware in ethical decision-making, with sig. Of 0.007, much smaller than the standard limit of 0.05. Meanwhile, H2b predicts that the RTP will have differences between males and females, which will indirectly affect AWR. The test results show that GEN has no significant influence on the RTP, with the path coefficient having a value of -0.106 and reliability = 0.140 > 0.05. Therefore, hypothesis H2a is supported, and H2b is not supported.

H3 predicts that PD affects AWR in the field of accounting and auditing. The result of the path coefficient has a positive value (0.724) with a sig. Of 0.000 < 0.05, showing that the smaller the PD, the higher the AWR of each individual. In conclusion, H3 is supported.

Inheriting from the research of Vinson et al. (2020), the research team expects that AWR affects JUDG, which in turn affects INT. The obtained results are completely reasonable, in accordance with the logical sequence. The path coefficient of the awareness variable to the judgment variable is 0.900, with a sig. Of 0.000 < 0.05, along with that, the path coefficient of the judgment variable to intention is 0.260 with a sig. Of 0.000 < 0.05. Especially, R² for awareness → judgment path analysis reaches the value of 0.809, showing that the JUDG of the surveyed subjects depends largely on the person’s AWR.

The hypothesis H4 was tested for the detailed impact of education on ethical decision-making.

Overall, education partly influences an individual’s risk taking propensity (Table 6). However, students majoring in accounting-auditing tend to be more cautious with risks than others, as shown by the test results with a sig. Of 0.009 < 0.05. On the other hand, the educational level has a significant impact on each person’s ethical awareness: auditors have higher awareness than students (sig. = 0.001), and the upper-level students have higher awareness than new students who have not been exposed to the experimental environment as well as professional training courses (sig. = 0.013). In addition, it is not possible to accurately conclude the difference between students majoring in accounting-auditing with other majors (sig. = 0.15 > 0.05). To sum up, hypotheses H4a, H4b, H4d are supported, while H4c is not.

Table 6: Regression Results for the Effect of Educational Factors on Dependent Variables

5. Conclusion and Recommendations

This paper investigated the current situation of ethical decision-making of students in the field of accounting auditing in Vietnam. Four cases related to auditing were used to measure and comparisons were conducted between students and auditors in different areas of the country. After performing calculations, testing, analysis, and evaluation, these were remarkable points:

First, gender has a direct influence on ethical awareness and ethical decision-making, particularly, women who have higher ethical awareness and tend to be more circumspect when making decisions related to professional ethics. According to the risk-response theories and psychology, women were careful, democratic in nature, while men emphasized centralized control, power, rule, and authority. Thus, men are likely to make riskier decisions than women, even in ethics. Additionally, the study of Tran and Nguyen (2020) indicated that female auditors provide higher audit quality than male auditors, and it was clear evidence of the impact of gender on professional decisions, including ethical decisions. However, it should be noticed that gender does not have a significant influence on risk-taking propensity. The study by Vinson et al. (2020) and MENA revealed that gender does strongly affect risk-taking propensity, however, they did not put this factor into the relationship with ethical professional decision-making. Cohen et al. (2001) argued that the gender variable should be controlled in the study related to ethics due to concern about prejudge and social expectations towards gender.

Second, the educational background in Viet Nam has an impact on ethical awareness and ethical decision-making. The results indicate that auditors have higher ethical awareness than students, and final-year students also have higher ethical awareness than freshmen. Meanwhile, the study conducted by Fleming et al. (2010) had inverse results, that auditors have lower ethical awareness than students. It was a positive signal for Vietnamese education in general and accounting-auditing education in particular.

It can be seen that the advantage of students majoring in accounting-auditing is having proper knowledge and understanding the nature of accounting-auditing objects in the educational process, as well as having the opportunity to get access to legal documents from fundamental subjects. However, students have not had real experience with auditing, as well as encountered situations that ethical decision-making is required (Clikeman & Henning, 2000). Due to limitations in facilities and knowledge systems, existing auditors’ ethical awareness may not be as excellent as current students, but the process of obtaining practical experience still gives them enough awareness, professional judgment, and the ability to make ethical decisions effortlessly.

A noticeable finding is that the survey responses have a relatively large standard deviation, showing a diversity of opinions among three groups: freshmen, last-year students, and auditors. This finding has similarities with the study by Cohen et al. (2001) for the target group of senior management, students, and auditors respectively.

Education, especially ethical education, provides the proper, accurate awareness about rules and standards, which contribute to adjusting human behavior in accordance with social ethical standards. In particular, ethical education in the field of accounting-auditing is considered to be a foundational subject, which should be mastered by every individual in the field of accounting-auditing because it is an outstanding characteristic of the profession. Besides, through the analysis result of each case, it can be seen that the educational process has only a particular impact, the influence of background, environment, and the law should also be taken into account, in both ways which support or are independent of education.

Thirdly, subjects with higher risk-taking propensity are less likely to pay attention to ethical awareness. In general, all subjects surveyed accepted risk at a medium-low level. It can be seen that, in the culture of Vietnam, people tend to be moderately afraid of change. They feel that they are threatened by unclear situations, uncertain outcomes, and they try their best to avoid these situations by looking for stable jobs, establishing strict rules, and avoiding disruptive ideas and behaviors.

One more remarkable point is that power distance has a negative effect on ethical awareness and ethical decision- making. According to the survey of Hofstede (2016), Vietnam has a quite high power distance index, but relatively lower than other countries in the Asia-Pacific region. High power distance is shown in the daily life of the Vietnamese, as well as in work. In the family, sons and daughters must obey their parents. In organizations, it is clear that the boss employee relationship has a great distance. There is also a huge distance between leaders and others.

Collectivism has existed for a long time in Vietnam. It is characterized by a tight social system and self-sustaining communities. Vietnamese always try to live in harmony and avoid humiliating others. In conflict, they want a mutually beneficial solution.

It can be said that this study has made a remarkable contribution to the ethical aspects and ethical decision-making of accounting-auditing. First of all, it is a novelty when the analysis sample of this study is collected from accounting and auditing students in Vietnam. Next, the path analysis method, which is rarely applied in studies in Vietnam, has been overcome by the research team when testing multiple multi-directional hypotheses with variables that are difficult to analyze by linear regression.

The research team proposes some specific recommendations for accounting-auditing students, schools as well as professional associations, and business owners. Information and knowledge related to professional ethics as well as programs and seminars that address this issue should be known and studied more widely to build and form good ethical awareness for students from the very beginning to familiarize themselves with the basic knowledge. Enterprises need to build a strict internal control system to promptly prevent acts of violating professional ethics.

In general, although this study has achieved certain results, the limitation may be the quality of the research samples. Because the situations presented have many factors, expertise, and may not be completely clear to some survey respondents as well as the available ethical standards that make survey takers decision making is relatively perceptive. It is possible to overcome some limitations and expand future research directions by conducting experiments on a large scale; the situations used in the survey need to be clearer, easier to understand, or add new factors to the model.

This research is expected to provide insights into ethical awareness as well as ethical decision-making in the field of accounting and auditing, and to give managers more specific information related to professional ethics issues of accountants-auditors.