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Chapter I

Introduction

As professionals, accountants are bound by their duty to serve public interest through

preparation and presentation of relevant and faithfully represented financial statements and

performance of attest functions which exhibit exercise of independent professional judgment.

Therefore, a professional accountant is not bound to exclusively satisfy the needs of the

individual client or manager. And so, standard setting bodies such as the International Ethics

Standards Board for Accountants (IESBA) of the International Federation of Accountants (IFAC)

requires the compliance to the Code of Ethics for Professional Accountants in order to ensure

that the fundamental principles of integrity, objectivity, professional competence and due care,

confidentiality, and professional behavior will be adhered upon by its members at all times.

However, despite of the existence of such code, dishonest and wrongful application of

accounting principles supported and even perpetuated some of the biggest corporate frauds

that happened in the past few decades. The most famous ones in the United States are the

cases of Enron and WorldCom in which their stakeholders were adversely affected: investors

incurred huge losses, employees lost their jobs, business partners such as suppliers and

distributors lost a big chunk of their revenues due to the loss of a big client, the community

suffered due to loss of services provided by the company, and the economy suffered reduction

in terms of growth and output. Cumulatively, these corporate frauds have caused investor

pessimism which contributed to recession suffered by the United States during the early 2000s.

As a result, the accounting profession was put in bad light and suffered the loss of public

trust. In the study of Lampe and Garcia (2013) on public accountancy in United States, they

concluded that accountancy has lost its professional status in or before 2002 and that regaining

the elite status is difficult. One of the factors contributing to such deprofessionalization is the
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loss of public trust which results to the public questioning the professional judgments of the

accountants and demanding stricter government regulations. This is evidenced by the passage

of the Sarbanes-Oxley Act and the creation of Public Companies Accounting Oversight Board

(PCAOB) (Akadakpo and Enofe, 2013).

Because of the the renewed realization of the importance of ethics in the field of

professional accounting, many researchers conducted research studies that took different

approaches in order to explain what affects the ethical behavior of accountants. Some

expounded on the necessity of the Code of Ethics in influencing professional accountants to be

ethical (Abernethy, Bouwens and van Lent, 2012; Akadakpo and Enofe, 2013). The study of

Stonciuviene and Naujokaitiene (2013) identified that insufficient understanding and improper

interpretation of the norms of ethical behavior leads to the formation of accountants unethical

behavior. However, some studies point out that the Code of Ethics is not enough to ensure

ethical behavior (Victor and Cullen 1988; Akadakpo and Enofe, 2013). Upon consideration of

the previous studies conducted, other researchers aimed to identify other factors that may affect

the ethical behavior of the professional accountants and how they directly and indirectly

interplayed with each other.

Among these factors, ethical climate has been one of the most studied in the research

literatures. The basis of most ethical climate studies is the Ethical Climate Theory of Victor and

Cullen (1988) which is classified ethical climates based on the dimensions of ethical criteria and

locus of analysis of a person. They were able to empirically identify the existence of five ethical

climates, namely: instrumentalism, caring, independence, rules, and law and code. Most of the

studies were able to support the contention that ethical climate does matter in determining the

ethical behavior of the people inside a firm (Simha and Cullen, 2011). Ethical climates have a

variety of effects in the organization outcome, some of which are favorable while others are not.

Among these ethical climates, independence, rules, and law and code are under the principled
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ethical criteria which take its basis on deontology. These principled ethical climates guide and

provide justification for ethical decisions and action (Erakovich and Wyman, 2002). In the

perspective of the accounting profession, the ideal ethical climate is the law and code because

professional accountants are bound to follow the Code of Ethics for Professional Accountants

which provides a conceptual framework approach in deciding a course of action based on the

circumstances which will not compromise the fundamental principles.

Because of the limited studies in the Philippines regarding the ethical climate in the

accounting profession, the researchers aim to fill this gap of knowledge and determine whether

there exists a prevailing ethical climate in general and per sector, whether there is an existing

difference among the prevailing ethical climates per sector and whether if it is in favor of

complying with the Code of Ethics for Professional Accountants. By establishing this body of

information, future researchers will be able to use the results of the study as basis for their

studies as they dig deeper in the field of professional accounting ethics in the country.

Research Questions

In order to fill up the gap of knowledge in the area of professional accounting ethics with

respect to the ethical climate among the professional accountants in the Philippines, the study is

concerned in gaining critical insights regarding the prevailing ethical climate of the professional

accountants in the Philippines. Accordingly, the study aims to answer the following questions:

1. Is there a prevailing ethical climate among the professional accountants in the

Philippines?
2. Is there a prevailing ethical climate among the four sectors of practice from which

the professional accountants in the Philippines exercise their profession?

3. Is there a significant difference among the ethical climates across the sectors?
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Theoretical Framework

Figure 1.1 Ethical climate matrix as established by Victor and Cullen (1988).

In their 1988 study, Victor and Cullen developed the theory of ethical climate which

presented a typology of ethical climates and explanations for the differences in the perception of

ethical climates existing within and across organizations. The 3x3 matrix is composed of two

dimensions, the combinations of which correspond to a certain type of ethical climate. The first

dimension is the ethical criteria which are based on three moral philosophies under normative

ethics. They are:

Egoism, which is mainly based on the principle of profit maximization or maximizing the

benefits received by the individual.

Benevolence, which is mainly based on utilitarianism which aims to gain the greatest

good for the greater number.

Principle, which is based on the concepts of deontology.

It can be noticed that these three moral philosophies can also be associated with the

levels of cognitive moral development developed by Lawrence Kohlberg, namely pre-

conventional morality, conventional morality and post-conventional morality. However, Victor and

Cullen noted that ethical climate is a group level phenomenon, thus making the moral
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philosophies a more proper ethical criteria dimension than Kohlbergs theory which describes

ethical decision-making on individual basis.

The second dimension, on the other hand, refers to the locus of analysis or the group

serving as the point of reference when making moral judgments namely the individual, company

or local, or cosmopolitan or universal.

Through the matrix, Victor and Cullen theorized that any one of the three ethical criteria

dimensions can operate at each locus of analysis. Though 3x3 matrix suggests nine possible

climate types, they were only able to empirically prove the existence of five dimensions which

they labeled as caring, instrumental, independence, rules, and law and code. The study also

showed significant differences in perception of climate type both across and within firms.

The study gave birth to the Ethical Climate Questionnaire (ECQ), an instrument that

identifies an organizations ethical climate based on the perceptions of those constituting the

organization.

Conceptual Framework
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Sector of Ethical
Practice Climate
Public Instrumental
Private Caring
Government Independence
Research and Rules
academe Law and code

Figure 1.2 The conceptual framework of the research

The conceptual framework above reflects what the researchers aim to find out in the

study. The independent variable of the study is the sector of practice which is from which the

dependent variable, ethical climate, would depend. The resulting prevailing ethical climate in

general and per sector of practice, should they exist, will be interpreted using the traditional

interpretations of the ethical climate typologies in the perspective of compliance with the Code

of Ethics. The researchers will also determine whether there exist significant differences among

the ethical climate among the sectors.

Significance of the Study

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Due to the corporate scandals that affected the confidence of investors in the recent

decade, ethical practices in the field of accounting is seen as a key in restoring their trust and

maintaining it in order to stimulate the economic growth of the country. Through proper values

and ethical work practices exhibited by the professional accountants, the stakeholders will be

assured about the relevance and faithful representation of the financial reports. This, in turn,

would direct investments in productive enterprises, thus facilitating the proper allocation of

economic resources across the industries, thereby enhancing the efficiency of the economy to

generate returns. Should this economic condition prevail over time, it will eventually lead to

sustainable economic growth.

Aside from this, the accounting profession will also benefit from ethical practices of its

practitioners. Professional ethics provides the following benefits to the accountants (Jenfa,

2000; Nwagboso, 2008, as cited in Ogbonna and Ebimobowei, 2012):

It helps the accountant to determine the prosperity of his conduct in his professional

relationship
It indicates the kind of professional posture the accountant must maintain if he is to

succeed;
It gives clients and potential clients a basis for feeling confident that the professional

sincerely desires to serve them well and places service above financial reward
It gives clients assurance that standards of competence, independence and integrity

shall remain the goal of the accountant

It enables member bodies and regulatory authorities to fulfill their responsibility of

ensuring that the professional accountants have the capabilities and competence

expected of them by employees, clients and the public

Public interest is protected and the credibility of the profession is enhanced.
To summarize, professional ethics enhances the accounting profession by making sure

that it is able to fulfill its role in the country.

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In a more specific sense, should the research prove the existence of a prevailing ethical

climate among professional accountants in general and per sector of practice in the Philippines,

interpretations based on the resulting ethical climates can be used by the professional

accountants so that they will have better knowledge on how their sectors influence their

compliance with the Code of Ethics. As a result, they will be able to better assess the

circumstances they are in and make more ethical decisions in the future.

On the other hand, organizations, whether non-profit or for profit, will be able to

determine which ethical climate needs to be implemented in their respective accounting

departments to ensure reliable and objective financial reports which will serve the best interest

of their stakeholders.

The results of the study can also be used by the professional regulatory units in the

Philippines, both governmental and non-governmental, in formulating effective measures that

would ensure the compliance of the professional accountants to the Code of Ethics and which

sector/s need more supervision as compared to other sectors..

Future researchers can also use this study in order to further establish the knowledge

about professional ethics here in the Philippines. By establishing a body of information about the

prevailing ethical climate among professional accountants in the Philippines in general and by

sector, future studies will have a more solid basis as they expand to a more descriptive

approach of the study and take into account more variables to explain further the causes and

effects of the ethical professional behaviors of the accountants.

Scope and Limitations of the Study

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The study aims to determine whether there exists a prevailing ethical climate among

professional accountants in the Philippines and in their sector of practice and how it may affect

their compliance with the laws, Code of Ethics and other regulations for the accounting

profession. As such, the subjects of the study will only include Certified Public Accountants as

recognized by the Philippine Regulatory Commission (PRC) who are currently employed in a

company or an organization in exercise of their profession. Also, due to the information

constraint, details about the distribution of professional accountants per sector of practice shall

also be derived from the records of the members of Philippine Institute of Certified Public

Accountants (PICPA) which will only serve as an estimate rather than actual distribution of

accountants per sector.

Because the study will focus only the ethical climate, other factors that may affect a

professional accountants behavior whether in favor of or against the Code of Ethics shall not

be considered either as a direct variable or a mediating factor in the relationships stated in the

conceptual framework of the study. This include, but are not limited to, personal, environmental,

organizational, and social aspects that are widely studied and has been proven to affect ones

behavior such as leadership, organizational culture, personal attitudes, and the like. The study

also factors out impression management which was discussed in the study of Shafer (2009) on

the ethical climate, organizational-professional conflict and organizational commitment of public

accountants as an important variable ignored in the past studies on ethical climate

Also, being reliant on the theory of ethical climate of Victor and Cullen (1988), the

analysis of the study will also be subject to the limitations of the instrument and typology. In their

study on the evolution of the studies on ethical culture, its effects on the organizational behavior,

and its future applications, Simha and Cullen (2011) pointed out two critical issues that should

be addressed to make future studies more relevant and insightful. One of such issue is the use

of different measures which affects the comparability of the results among the past studies. On
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the other hand, the other issue is concerned with the use of traditional outcomes with the

egoistic climates receiving a negative interpretation. Because the study aims to establish the

knowledge on the ethical climate of the professional accountants in the Philippines, the following

issues will not be addressed because they require sufficient previous ethical climate studies to

provide a strong basis.

Hypotheses of the Study

In order to investigate the relationships of the variables in the study, the following null

hypotheses are made:

HO1: There is no prevailing ethical climate among the professional accountants in the

Philippines.

HO2: There is no prevailing ethical climate in each of the four sectors of practice in which

professional accountants in the Philippines exercise their profession.

HO3: There are no significant differences among the ethical climates across the sectors.

Assumptions of the Study

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Certified Public Accountants which work in two or more sectors would be classified

under the sector in which he deemed that influences his values the most. If there is

indecision, the sector in which he puts the majority of his time and efforts will be the one

considered.
The ethical climate prevailing in a sector is equally applicable among the professional

accountants in that sector and that they exercise same degree of compliance with laws,

the Code of Ethics and other regulations for the accounting profession in the Philippines.
The other internal and external factors aside from ethical climate that may affect the

compliance of a professional accountant with the laws, Code of Ethics and other

regulations are not considered in the study and are therefore irrelevant.
The respondents are assumed to know the basic provision of the Code of Ethics.
The breakdown of the sectorial affiliations of the PICPA members corresponds to the

actual distribution of the registered CPAs in the Philippines among the four sectors of

practice.
The ECQ is applicable in the accounting profession because majority of the accountants

belong to an accredited professional organization like PICPA and the profession is

regulated by the Board of Accountancy through the Republic Act 9298.

Definition of Terms

Accounting Fraud- n. (also sometimes called corporate fraud or financial reporting fraud) a

material misrepresentation resulting from an intentional failure to report financial information in

accordance with generally accepted accounting principles (Center for Audit Quality).
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Business Ethics n. the critical, structured examination of how people & institutions should

behave in the world of commerce. (MacDonald, n.d.)

Ethical working climate- n. the prevailing perception of typical organization practices and

procedures that have ethical content (Victor and Cullen, 1988).

Ethics n. an area of study that deals with ideas about what is good and bad behavior: a

branch of philosophy dealing with what is morally right or wrong (Merriam-Webster Dictionary).

Government Practice n. shall constitute in a person who holds, or is appointed to, a position

in an accounting professional group in government or in a governmentowned and/or controlled

corporation, including those performing proprietary functions, where decision making requires

professional knowledge in the science of accounting, or where a civil service eligibility as a

certified public accountant is a prerequisite. (R.A. 9298)

Private Practice n. shall constitute in a person involved in decision making requiring

professional knowledge in the science of accounting, or when such employment or position

requires that the holder thereof must be a certified public accountant. (R.A. 9298)

Profession- n. a type of job that requires special education, training, or skill (Merriam-Webster

Dictionary).

Professional Ethics- n. professionally accepted standards of personal

and business behavior, values and guiding principles. Codes of professional ethics are

often established by professional organizations to help guide members in performing

their job functions according to sound and consistent ethical principles. (Business

Dictionary.com)

Public Practice n. shall constitute in a person, be it his/her individual capacity, or as a partner

or as a staff member in an accounting or auditing firm, holding out himself/herself as one skilled
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in the knowledge, science and practice of accounting, and as a qualified person to render

professional services as a certified public accountant; or offering or rendering, or both, to more

than one client on a fee basis or otherwise, services such as the audit or verification of financial

transaction and accounting records; or the preparation, signing, or certification for clients of

reports of audit, balance sheet, and other financial, accounting and related schedules, exhibits,

statements or reports which are to be used for publication or for credit purposes, or to be filed

with a court or government agency, or to be used for any other purpose; or the design,

installation, and revision of accounting system; or the preparation of income tax returns when

related to accounting procedures; or when he/she represents clients before government

agencies on tax and other matters related to accounting or renders professional assistance in

matters relating to accounting procedures and the recording and presentation of financial facts

or data. (R.A. 9298)

Research and Academic Practice n. shall constitute in a person in an educational institution

which involve teaching of accounting, auditing, management advisory services, finance,

business law, taxation, and other technically related subjects: Provided, That members of the

Integrated Bar of the Philippines may be allowed to teach business law and taxation subjects.

(R.A. 9298)

Chapter II: Review of Related Literature

Ethics Defined

By definition, ethics (from the Greek word ethos meaning the science of morals) is a

code of moral standards by which people judge the action or behavior of themselves and others.
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Ethics is all rules of conduct shared by a particular community, rules that are based on the

distinction between good and evil. It should be distinguished from morality which is all the

principles of universal normative dimension (often dogmatic), based on the distinction between

good and evil. (Wundenburger, 1993, as cited in McKenna, 2012).

Major Branches of Ethics

In the field of philosophy, philosophers generally recognized three major areas of study

namely meta-ethics, normative ethics and applied ethics. Each major area focuses on the

different aspects involved in ethics. Such differences can be summarized by the following:

1. Meta-ethics
Answers the question What does "right" even mean?
Meta-ethics is the attempt to understand the metaphysical, epistemological,

semantic, and psychological, presuppositions and commitments of moral thought, talk,

and practice (Stanford Encyclopedia of Philosophy). Simply speaking, it is concerned

with the basis or essence of what is good and bad, as opposed to the other branches

that aim to identify what is good or bad.

2. Normative ethics
Answers the question How should people act?

Normative ethics prescribes certain actions to be done in certain circumstances

as ethically good. It addresses the issue of whether an action is right or wrong (Jackson,

2014). In this case, there are three elements to be considered for every action: first, the

one performing the act or the agent; second, the act itself; third, the consequences of the

act. There are 3 main branches of normative ethics with each one focusing on one of the

three elements. They are:

a) Consequentialism- approaches in the study of morality that considers the

consequences or outcomes in evaluating alternative actions. The most

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popular consequentialist concept is utilitarianism which aims to maximize

the good of many and the two terms are exchangeable in some

literatures. There are several limitations which affects the applicability of

consequentialism. First, one cannot determine all the possible alternative

actions and the effects such action may bring. Also, even if alternatives

and outcomes are fully determinable, there is no yardstick measure for

the benefits brought about by each consequence and as such are subject

to subjective biases or preferences.

b) Deontology- comes from the Greek word deon which means duty. In

contrast to consequentialism, deontology does not look at the effects of

the actions to determine what is good or bad but rather judges an action

as moral because it is the right thing to do. One of the major advocates of

deontology is Immanuel Kant who developed a standard test of what

defines a moral act. It states that a person should act as though a

personal maxim is a universal law which will be applicable to everyone

despite of the differences in circumstances. Because of this, deontology is

often critiqued as inflexible in terms of situational and cultural aspects.

And since moral actions are done because of duty, it is considered lacking

by individuals who regard motivation as crucial factor in decision-making.

c) Virtue ethics- addresses the agent unlike the two approaches. It contends

that the most important aspect of morality is having the right character.

The most famous proponent of virtue ethics is Aristotle who considered

the golden mean as the primary value. By striking the balance, an

individual is able to become a moral person. Like consequentialism and

deontology, virtue ethics is subject to several limitations. One of which is

the question of what determines the values a person should possess.

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Another related limitation is how a virtue can be determined as present in

a person and the degree that one exhibits such virtue.

3. Applied ethics
Answers the question How do we take moral knowledge and put it into

practice?

Applied ethics investigates on how a normative system is applied in practical

circumstances and/or within a specific field (Jackson, 2014). This involves identifying

real life circumstances that pose the necessity to act ethically and ethical dilemmas

where once judgment of which is the most ethical course of action can be applied.

Business ethics belong in this field of study.

Ethics Applied to Business

In the past, businesses assumed that staying within the boundaries of law is considered

to be ethical already however an important distinction of being legal and ethical should be

emphasized. Legal is staying within the words of law while ethical means doing the right/good

thing. The important difference lies in the fact that law sometimes lags issues that arent

universal, meaning issues that are not well established has no express provision in the law.

Therefore there are instances we are not violating any codal provisions but still neglect to do the

right thing.

However, current views on business ethics place it as one of the sources of competitive

advantages wherein an effective strategy can be derived. It involves examining, mining, and
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distributing ethical resources and aligning them with a certain strategy, which in the end will help

the company achieve its goals.

When speaking of ethics in the context of a workplace, there is also the necessity to

describe the organizational behavior of the people in the workplace. Basically, organizational

behavior deals with the behavior of people in the organizations that they belong to. It describes

the relationship between the organization and the groups existing in the organization and how

both interact with the organization itself (McKenna, 2012).

What Makes an Organization Moral? (Bowie and Schneider, 2011)

Code and Compliance Program similar to legal regulations and the first step

initiated by companies that is structured to comply with the governing laws

covering the industry. It is considered as a negative document for it only hinders

negative or unethical behavior and does not promote ethical or positive actions.

Organizations are built to standardize code and compliance programs in a certain

industry. The loophole in the code and compliance program is that its limited to

issues already universalized and does not cover issues yet to exist.
Corporate Identity and Values Program focuses on what the company stands

for thus promote corporate ethical behavior rather than the negative approach

under the code and compliance program. Since these are identity building, it

works best if integrated to the everyday decision making of the company and of

course a periodic review of such decision and decision patterns

Social Outreach Programs rooted from the idea that the corporations are

persons living in the community, they have civic responsibilities that individuals

have. These programs can do extreme workers for the companys reputation and
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its performance. It has to be noted that such programs couldnt serve as a

defense if the company in the future does something unethical.

The Role of Ethics in Business: Its Effect on the Bottom Line

As the saying goes, ethics pays. In the short run, however, this may not be true (Bowie

and Schneider, 2011). Ethical policies may be costly to implement, there are costs associated

with potential partnerships that was not pushed through since it would be result to a partnership

with companies that does not share the companies values. There may also be production

processes that are neglected because its effects to the environment or to the workforce using

are still undetermined despite it would reduce production cost. However, in the long run, many

litigation cost could be completely thwarted by going ethical. Also building ethical relationships

with the suppliers and distributors could streamline the arrangements that are favorable to all

parties involved. Lastly, the customer retention and brand loyalty that gong ethical could give the

company. Happy customers could also be a form of advertising since they could share it with

the rest of the community to achieve happy customers, the company must do the right thing.

Accounting Gone Wrong: A Look Back on the Enron Scandal

More than the business itself, unethical issues affect the country of origin for prospective

investors may come to a hasty generalization of the ethical trends on that country. More than

that, it is not only those who intent to go the wrong way is affected but also many innocent

people. To emphasize the importance of ethics in business, a short discussion of the infamous

Enron scandal is presented:

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The Enron Debacle

Enron, once one of the biggest suppliers of energy in a global scale was quick to hit rock

bottom due to the discovery of the accounting fraud they did. Enron maximized loopholes in the

US GAAP to manipulate the numbers in its financial statements depriving stakeholders of its

true financial health (Brooks and Dunn, 2012). The following are examples but not limited to of

the Enron fraud:

Revenue Recognition Enron recognized revenue which it should not example is

recognizing the gross profit of goods entrusted to Enron as the agent where in

the commission of the sale was also recognized resulting in recognition of two

income in one transaction when only one is appropriate

Mark-to-Market Accounting Instead recognizing long term investments as long

term assets, Enron recognized it as instant income ballooning the income for the

period but in reality is not sure to be earned. Since current income is high, the

way to maintain it is to invest again and recognize income again in the next

period. All these investment later turned out to be losses.

Special Purpose Entities Enron starts subsidiary companies that they use to

make loans. In return the financial statements of Enron would show a high equity

ratio but in reality some of the equity is really a liability hidden through the special

entity

The following frauds are accounting practices misapplied at the discretion of the leaders of

Enron.

More than its effects on the owners who lost a big chunk of their investment, many

stakeholders are affected such as employees who lost their job, the community which lost a

benefactor, the businesses which relied on Enrons supply of energy, the Houston

community as a whole which also relied on Enrons supply of energy, and Enrons suppliers
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which lost a large client. This in turn affected the economy of the locality where it once

operated.

The Auditor: Arthur Andersen

Being Enrons auditor, the firm Arthur Andersen suffered damages along with Enron. As

auditors, their duty is to ensure the financial statements of Enron and history dictated that they

did not quite do their job. Confidence in the financial markets, in corporate governance and

financial statements that underlay investor decisions and in the audit profession eroded

dramatically. Arthur Andersen and its personnel were confronted by several conflicts of interest,

which may have impinged upon and weakness their resolve to act in their fiduciary relationship

(Brooks and Dunn, 2012). Their operation was ceased although they were permitted to re-

engage in business; Arthur Andersen wasnt able to return to the ordinary course of operations

and later on shutdown. It never recovered from the negative branding the Enron scandal

attached to it.

The Sarbanes Oxley-Act

Probably the most known effect of the Enron debacle is the formation of the Sarbanes

Oxley-Act or simply SOX

Key points in the SOX (Bowie and Schneider, 2011):

Inclusion of the Material Financial Formation companies have to report any and

all assets and liabilities on their financial statements including many off-balance-

sheet items.
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Regular Review of Internal Audit Control company executives who sign on

quarterly and annual financial statements also must certify that they reviewed

their own procedures for ensuring that those statements are accurate and

complete. SOX also requires executives to disclose any weakness they had

identified in their internal controls

Third-Party-Sign-Off on Internal Audit Controls external accounting firms also

have to assess and report of the effectiveness of their clients internal procedures

and controls.

Sox also imposed penalties on those who will be proven as committed fraud.

The aftermath of Enron is unquantifiable as discussed it affected many stakeholders,

more than that future businesses now faces more strict regulation which in turn may be a

negative signal for future investors. Without such, the countrys growth is impaired.

Professionalization and Deprofessionalization of the Accounting Profession

Profession may be defined, in general, as a type of job that requires special education,

training, or skill (Merriam-Webster Dictionary). This pertains to a special role in the community

done in the spirit of public service which is delegated on to select competent individuals. These

individuals are called professionals. However, most people are unfamiliar with the process of

professionalization, which refers to how a certain specialized role or job in the community

becomes recognized by the public as a profession, and deprofessionalization, which refers to

the decrease in professionalization.

In the study of Lampe and Garcia (2013) which investigated the professionalization and

deprofessionalization of public accountancy in the United States, they defined professionalism

through SORCELIST (Societal Recognition of Elite Status) model which is based on three
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theories of professionalism generated and published in sociology of the professions literature.

These three theories serve provide the main components of professional status: They are

A. Structural functionalism- structured to achieve an altruistic functional end

1. Skill based on theoretical knowledge

2. Code of ethical conduct (including monitoring and sanctions)
3. Advanced education and training

B. Interactionism- structured to recognize the consequences of interaction with society

1. Differentially recognizable from laity

2. Services needed by society
3. Advanced education and training

C. Critical Theory- structured to achieve monopolistic political power

1. Organized by one or few large organizations

2. Practice restricted by entrance exam and licensure
3. Entrance and practice standards self-regulated- no government intervention

In their study, Lampe and Garcia (2013) were able to find out that U.S. public accountancy

was only recognized as a profession by the public sometime between 1975 to 1985, in contrast

with the belief that accountancy has always been a profession. According to them

professionalization and deprofessionalization happens at the same time but both resulted to net

professionalization during the professionalization years. This was the other way around during

the era of rapid deprofessionalization in the late 1990s to 2002 where leaders in public

accounting has neglected most of the nine components of professionalization

They also concluded that accountancy has lost its prestige and professional status in or

before 2012 as a result of numerous factors that arose since its recognition as a profession with

the accounting manipulations serving as means of perpetuating corporate fraud. This led to the
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lost of public trust to the profession evidenced by the creation of Sarbanes-Oxley Act and Public

Companies Accounting Oversight Board (PCAOB).

In order to explain deprofessionalization, Lampe and Garcia (2013) also cited the theory of

deprofessionalization by M. R. Haug (1973, 1977) and Haug and Lavin (1981) which applies to

all profession.

a. Increases in education- since more people become educated, there are also more

people that becomes eligible to become professionals, reducing the prestige and elite

status of the professions

b. Divisions in professional labor- some professionals let their assistants do most of the

work to the point that their assistants become more knowledgeable in some matters

regarding about the profession than the professionals themselves.

c. Growing ideology of occupational equality- more users of professional services have

strated questioning professional decisions and demanding justifications.

d. Aggregation of clients in bureaucratic settings- Firm-wide corporate policies have

replaced auditor autonomy in large CPA firms.

e. Computer technology- computer technology allowed easier and faster data processing

and made data more accessible to more people. This helped in reducing the reliance of

the masses on the professionals with regards to several concerns which could have

been addressed by the professionals.

Accounting Professional Ethics

Due to the increase of interest in the field of accounting professional ethics as a

consequence of the corporate scandals, studies have been made on which motivates the ethical

behavior of the accountants. One of such is the study of Stonciuviene and Naujokaitiene (2013)

which investigated how professional ethics is motivated by the virtue of the accountant, the

working environment and the Code of Ethics for Professional Accountants. Basing their study on
 24

Rests model of executive ethical behavior, they interpreted the variables in relation four

components of the process psychological processes: moral sensitivity, moral judgment, moral

motivation and moral character. Results indicated that the virtues of the accountant such as a

sense of duty, integrity, fairness, attentiveness, independence and self-confidence are strong

motivators of ethical behaviors. On the other hand, the other two factor are deemed to have an

insignificant effect on ethical behaviors.

On the other hand, there are some researchers which focused on the implications of

professional ethics. In the studies of Ogbonna and Ebimobowei (2012) in Nigeria and

Mahdavikhou and Khotanlou (2011) in Australia, they were able to correlate ethical accounting

practices with the increase in the quality of financial reports.

Code of Ethics

The Philippine Institute of Certified Public Accountants (PICPA) is a member of

International Federation of Accountants (IFAC) and as such, is obliged to support the works of

IFAC. One of such works is the Code of Ethics issued by the IFAC, whose latest version is the

Handbook of the Code of Ethics for Professional Accountants (2010 edition) which is a revised

Code of Ethics for Professional Accountants (the IESBA Code) issued by the International

Ethics Standards Board of Accountants (IESBA). The revised IESBA Code is effective on

January 1, 2011 with early adoption permitted. All professional accountants and firms are

required to comply with the Code unless the Code states otherwise in certain circumstances.

The Code of Ethics is composed of three parts, namely Part A, Part B and Part C. As

stated in the Section 100.2 of the Code, Part A establishes the fundamental principles of

professional ethics for professional accountants and provides a conceptual framework that

professional accountants shall apply to:

 25

a. Identify threats to compliance with the fundamental principles;

b. Evaluate the significance of the threats identified; and
c. Apply safeguards, when necessary, to eliminate the threats or reduce them to an

acceptable level. Safeguards are necessary when the professional accountant

determines that the threats are not at a level at which a reasonable and informed third

party would be likely to conclude, weighing all the specific facts and circumstances

available to the professional accountant at that time, that compliance with the

fundamental principles is not compromised. A professional accountant shall use

professional judgment in applying this conceptual framework.

In section 100.5, the five fundamental principles in which professional accountants must

adhere to were named. They are the following as define by the Code:

a. Integrity to be straightforward and honest in all professional and business

relationships.
b. Objectivity to not allow bias, conflict of interest or undue influence of others to override

professional or business judgments.

c. Professional Competence and Due Care to maintain professional knowledge and skill

at the level required to ensure that a client or employer receives competent professional

services based on current developments in practice, legislation and techniques and act

diligently and in accordance with applicable technical and professional standards.

d. Confidentiality to respect the confidentiality of information acquired as a result of

professional and business relationships and, therefore, not disclose any such

information to third parties without proper and specific authority, unless there is a legal or

professional right or duty to disclose, nor use the information for the personal advantage

of the professional accountant or third parties.

e. Professional Behavior to comply with relevant laws and regulations and avoid any

action that discredits the profession.

 26

Threats are considered as those that may compromise a professional accountants

compliance with the Code which may arise on a situational basis. Threats fall into one or more

of the following categories as define by Section 100.12:

a. Self-interest threat the threat that a financial or other interest will inappropriately

influence the professional accountants judgment or behavior;

b. Self-review threat the threat that a professional accountant will not appropriately

evaluate the results of a previous judgment made or service performed by the

professional accountant, or by another individual within the professional accountants

firm or employing organization, on which the accountant will rely when forming a

judgment as part of providing a current service;

c. Advocacy threat the threat that a professional accountant will promote a clients or

employers position to the point that the professional accountants objectivity is

compromised;
d. Familiarity threat the threat that due to a long or close relationship with a client or

employer, a professional accountant will be too sympathetic to their interests or too

accepting of their work; and

e. Intimidation threat the threat that a professional accountant will be deterred from acting

objectively because of actual or perceived pressures, including attempts to exercise

undue influence over the professional accountant.

Safeguards on the other hand, are actions or other measures that may eliminate threats

or reduce them to an acceptable level. They fall into two broad categories as defined by

Sections 100.13 and 100.14:

a. Safeguards created by the profession, legislation or regulation

Educational, training and experience requirements for entry into the profession.
Continuing professional development requirements.
Corporate governance regulations.
Professional standards.
Professional or regulatory monitoring and disciplinary procedures
 27

External review by a legally empowered third party of the reports, returns,

communications or information produced by a professional accountant.

b. Safeguards in the work environment.

Ethical Conflict Resolution

The code also made provisions on the possibility that a professional accountant must resolve

ethical conflicts and threats through application of the fundamental principle. Should such

situation arise, Section 100.18 provided factors that may serve as useful consideration either

individually or together in resolving ethical conflicts. They are:

a. Relevant facts;
b. Ethical issues involved;
c. Fundamental principles related to the matter in question;
d. Established internal procedures; and
e. Alternative courses of action.

. If the matter remains unresolved, the professional accountant may consult the appropriate

persons in the firm to address such issue in order to come up with a way on how to proceed

with the matter

Studies on the Efficacy of the Code of Ethics in Ensuring Ethical Behavior

Several studies have been made in relation to the Code of Ethics of the professional

accountants in order to determine how it will ensure the ethical accounting practices. Some

studies showed to be in favor of the Code of Ethics Abernethy, Bouwens and van Lent (2012)

stated that there is a tendency among members of a professional association to develop and

exhibit common ethical values which, in the case of professional accountants, is influenced by

ethics education and the Code of Ethics regulating their conduct. This is supported by the
 28

results of the study of Akadakpo and Enofe (2013) in Nigeria which concluded that the ethical

behavior of the accountants is strongly influenced by the existing ethical codes of conduct.

On the other hand, there also those that contended that the Code of Ethics is not

enough to prevent unethical behavior and fully guide the accounting practice (Akadakpo and

Enofe, 2013; Victor and Cullen 1988). Another study by Stonciuviene and Naujokaitiene (2013)

showed that knowledge of the code of ethics has no influence on the perceived ethical behavior

of accountants.

Studies in the Field of Ethical Climate

In a business organization, ethical climate is one of the possible factors that may affect

the decisions of the employees should an ethical dilemma arise. As defined by Victor and Cullen

(1988), it is the prevailing perception of typical organization practices and procedures that have

ethical content. As a result, it serves as a guideline on how people inside an organization

should proceed in certain circumstances.

The study of the Victor and Cullen (1988) aimed to create a theory that would explain the

differences among the ethical climate within and firms. The result of their study gave birth to the

Theory of Ethical Climate that describes the determinants of the ethical climate in an

organization which are sociocultural environment, organizational from, and organization-specific

history. In connection to this, they were able to provide empirical evidence for the existence of

five ethical climate dimensions, namely law and code, caring, instrumentalism, independence,

and rules. The study also revealed the existence of significant differences in the ethical climate

within and across firms.

 29

The related studies and literature throughout the years since 1988 about the ethical

climate has steadily accumulated until a renewed interest among researchers on business after

the corporate scandals has seen the widespread application of the in the studies and research

works because of the capacity of ethical climate to influence ethical behaviors in an

organization. Variety on the applications on the ethical climate theory can be observed wherein

researchers viewed ethical climates in a new perspective and related it to several variables that

exists within an organizational context. In these studies, the Theory of Ethical Climate and the

typology developed by Victor and Cullen (1988) were used as the basis most of the.

One of the studies that investigated ethical climate from a new perspective is the study

of Buchan (2009) wherein he tried to determine whether there is a difference among the

perceived ethical climate that exists among the partners and employees in an auditing firm. The

findings of his study suggest that partners perceptions of the instrumental dimension of ethical

climate differ from those at other levels in the firm. This is important because the tone at the top

is a significant factor in the occurrence of dysfunctional auditor behavior (Tervo, Smith and

Pitman, 2013). Simha and Cullen (2012) also noted that the egoist or instrumental climates

have more or less been associated by the previous studies in negative behaviors. Based on

these studies, the presence of an instrumental climate in the higher level of management can

promote unethical accounting practices.

On the other hand, Abernethy, Bouwens and van Lent (2012) tried to determine the

relationship of ethical climate with the performance measure choice and accounting

manipulation. Based on a sample of 550 managers, their findings show firms with ethical

climates with a focus on self has more expensive performance measures because the

employees need external source of motivation to act ethically in contrast with those having the

ethical climate with the focus on others that does not need much incentive to ensure ethical

behavior. They also demonstrate that an ethical work climate with a lower focus on self
 30

reduces the incidence of accounting manipulation. Meaning, ethical climate with the orientation

of caring, instrumental, rule or law code as shown in the matrix of Martin and Cullen will entail

less regulation.

Because of their observation that research works consistently show that employee

turnover is a serious problem especially in the environment of corporate management, nursing,

and public accounting firms, Omar and Ahmad (2014) conducted a study which related ethical

climate, job satisfaction, organizational commitment and auditors turnover intention. The results

of the study reveal that ethical climate has a positive association with job satisfaction while it

cannot be directly related to auditors turnover intention. On the other hand, the significant

negative relationship of job satisfaction and organizational commitment with turnover intention

indicates that both factors as predictors of turnover intention. Further statistical analysis shows

that job satisfaction has a significant effect on organizational commitment.

Chapter III: Research Methodology

Research Design
 31

The research takes a descriptive approach in order to address the problems of the study

which will be implemented in two steps: the descriptive evaluative step and the causal

comparative step. During the first step, the researchers will determine the prevailing ethical

climate among professional accountants in general and per sector of practice. From here,

interpretations are made based on the descriptions per typology. If there is an existing prevailing

ethical climate per sector of practice, the causal comparative step will determine whether there

are significant differences among the ethical climates across the sectors of practice. Should

there be significant differences, results will be further analyzed in order to determine the reason,

if possible, and to suggest the direction of the future studies which will be conducted relating to

the ethical climate of the professional accountants in the Philippines

Study Locale

In order to address the need for information on the local application of the Ethical

Climate Theory especially in the accounting profession, researches chose to conduct the study

in the Philippines where there is an increasing demand for the services of professional

accountants as businesses flourish in the current economic expansion in the country.

Population and Sampling

The respondents of the study will be the Certified Public Accountants (CPAs) who are

registered under Professional Regulation Commission (PRC) currently employed and exercising

their profession as accountants in one of the four sectors of practice: public practice, private

practice, government practice, and research and academe. As a result, the research will not

cover accountants who are unemployed or underemployed and those who are not recognized
 32

as an accounting professional by the government. The data on the distribution population of

Filipino CPAs per sector of practice shall be based on the records Philippine Institute of Certified

Public Accountants (PICPA) as of June 30, 2014 as approved by its Executive Director Jose M.

Ireneo to be used by the researchers in the study

Sector of Practice No. of % Breakdown Sample Size per

Members Sector (rounded up)
Commerce and Industry 6,632 38.59% 146
Education/Academe 712 4.14% 16
Government 2,598 15.12% 57
Public Practice 7,242 42.14% 159
Total 17,184 99.99% 378
Using the table for determining sample size by the Philippine Social Survey Council, the

desired sample size for a population of 17,184 registered PICPA members with a desired

reliability of 95% and margin of error of 5% is 376. This will be prorated based on the

percentage breakdown of the professional accountants with respect to their sectorial affiliations

and then rounded up to get the desired sample size per sector of practice. The table below

shows the computation:

Table 3.1 Sample size of the study per sector and in general

The sampling method used in the study is the stratified quota sampling. Professional

accountants will be classified based on the sectors where they are practicing their profession

and the number of respondents representing the sector will be determined through a statistical

table that determines a sample size for a certain population. Due to their limited connections to

the professional accountants in the Philippines and the uncertainty of the responses of the

respondents to whom the research instruments are distributed, the researchers will send

invitation to prospective respondents per sector of practice until they are able to gain enough

samples as required by the study. In case where a respondent practices in two or more sector,

the one he judges as the sector that is most influential to him shall be deemed his sector of
 33

practice. Should indecision arise, the sector of practice in which he spends most of his time and

efforts shall be the one deemed to be his sector of practice.

Research Instrumentation

The main instrument of the research is based the original Ethical Climate Questionnaire

(ECQ) developed by Victor and Cullen (1988) when they first established the modern typology

of ethical climates. Slight modifications in the wordings of the questionnaire are made to put it in

a professional practice perspective. The applicability of ECQ has been consistently proven

among the previous researches and the effects of ethical climate in the different aspects of an

organization have been proven by some studies (Simha and Cullen, 2012). The justification for

the use of the original ECQ is that it is proven as more consistent than the succeeding modified

versions through confirmatory factor analysis, thereby proving that it has more validity

(Fritzsche, 2000; Peter, 2000, cited in Barnes, 2012). A sample copy of the instrument used by

the researchers can be viewed at Appendix A.

Data Gathering Procedure

The data required for the study will be collected by the researchers through survey forms

to be answered by the target respondents of the study. First, the researchers will send out

letters to individual accountants and institutions in different sectors of practice like government

units, colleges and universities, and companies to ask if they would be willing to be part of the

research undertaking. The ECQ shall then be distributed to those who are willing to take part in

the study, either physically or through online surveys, whichever is preferred by the

respondents. This will be done until the target number of respondents which supplied all of the
 34

necessary data required by the ECQ is acquired. The research instrument shall be collected in

the terms and time agreed upon.

Statistical Treatment of Data

After gathering the answered questionnaires, the answers of the respondents are tallied

and tabulated to facilitate easier analysis and interpretation. Afterwards, the researchers

computed the means of the answers per item as a whole and on a per sector basis. These

means are then grouped based on which ethical climate upon which their corresponding

question item pertain, to be followed by the computation of the grand mean per ethical climate.

The researchers the ranked the grand means of each ethical climate, with the ethical climate

having the highest grand mean the prevailing ethical climate, whether in general or per sector

basis.

Once the grand means per ethical climate on per sector of practice basis are obtained,

the significant differences among the aforementioned means can be computed. The data is first

tested for normality, through One-sample Kolmogorov-Smirnov Test and through its skewness,

and homogeneity of variances, through Levenes test, in order to determine whether a

parametric test or a nonparametric test shall be used. Should result of the tests show that the

data is normal and the variances are homogenous, the parametric test one-way Analysis of

Variance (ANOVA.) is used. Otherwise, the nonparametric test Kruskal-Wallis one-way analysis

of variance is used. Based on the results, Tukeys Post Hoc Test is administered in order to

determine which of the sectors of practice are significantly different in terms of their observance

on how much the accounting profession exhibit a certain ethical climate.

 35

Ethical Considerations

Because the study deals with the ethics in the accounting profession, some respondents

might deem their responses in the study as confidential along with the other pertinent

identification details that they provided such as name, position, contact details and name of the

organization where they are working. In order to preserve the needed confidentiality,

researchers will not disclose any particular information that will leak such confidential

information unless it provides key information needed to make the result of the study more

comprehensive which will be remedied by the researchers by hiding their identities through

special name designation, i.e. Firm A, Firm B.

 36

Chapter IV: Results and Interpretation

The research aims to determine whether there exists a prevailing ethical climate among

the professional accountants in the Philippines as a whole and per sector of practice, and,

should there be an existing prevailing ethical climate per sector, to test whether there are

significant differences among the ethical climates per sector. This is done through the

administration of the ECQ to the target population sample. These answers are then interpreted

in order to determine the existence of the prevailing ethical climate of the professional

accountants in the Philippines in general and per sector of practice.

Upon gathering the responses from the required amount of sample, the researchers

interpreted the data by determining the means per test item, classifying the test items per sector

of practice, and getting the grand mean. The results of the study are summarized as follows:

A. The Prevailing Ethical Climate of the Professional Accountants in the Philippines

In order to achieve the one of the objectives of the study, there is a need to either accept

or reject the following hypothesis:

HO1: There is no prevailing ethical climate among the professional accountants in the

Philippines.

Based on the results of the study, there exist several ethical climates among the

professional accountants in the Philippines. These can be identified by the ethical climates

having a grand mean above 3 (Somewhat false) which indicate a degree of truth regarding the

test items and their corresponding ethical climates. This is in accordance with the original

research regarding ethical climate by Victor & Cullen (1988), there is a recognition of the fact

that different ethical climate may exist across various organizations at varying degrees. This
 37

means that the existence of the ethical climates is not mutually exclusive and they co-exist at a

certain instance. However, they are exhibited the people within the organization at varying

degrees, thus creating a prevailing ethical climate or the ethical climate which the people exhibit

the strongest.

The Prevailing Ethical Climate

Independenc
Instrumental Caring Rules Law & Code
e
2.955 3.87 3.285359801 4.472636816 4.401985112
2.967005076 3.9175 3.165413534 4.1825 4.254950495
2.496259352 3.392059553 3.28 3.491315136 4.415
3.165841584 3.772151899 3.6 4.007481297 4.1675
Means per
3.074812968 4.141439206
Question 3.0725 3.543424318
3.287128713 4.294554455
Item

Grand Mean 3.00264967 3.847304204 3.332693334 4.038483312 4.309858902

Table 4.1 Means per question item and grand means per ethical climate of the professional accountants in general.

The prevailing ethical climate in the accountancy profession in general is Law and Code

with a grand mean of 4.3099 followed by Rules with a grand mean of 4.0384 and then by Caring

coming at third with a weighted mean of 3.8473. These rankings are consistent with the results

of three out of four sectors, namely public practice, private practice and government practice.

Only the research and academe sector differed in which Caring became second to Law and

Code while Rules dropped to being the third. The difference in nature of work of the research

and academe sector may be the reason for such deviation (see further discussion in the

proceeding sections). Given that the academe accounts for the smallest portion of population of
 38

professional accountants in the Philippines, its deviation did not impact heavily the general

rankings of the ethical climates which remained consistent with the results of the other three

sectors of practice. In all four sectors, independence and instrumental comes fourth and fifth

with weighted means of 3.3327 and 3.0026, respectively.

Going back to the title of being a professional accountant or a Certified Public

Accountant (CPA), a professional accountant should serve the interest of the public in

accordance with their oath. Thus, egoistic acts and decisions are ideally not acceptable in this

profession. In addition, the accounting profession is a highly regulated profession governed by

laws, Code of Ethics for Professional Accountants, and professional standards. This explains

why the prevailing ethical climate in general and per sector of practice is Law and Code.

Per Item Analysis

Based on the tabulated data, it can be observed ECQ3 (It is very important to follow the

organizations rules and procedures) has the highest mean among the items at 4.4726. It also

has the lowest standard deviations at 0.6629 (see Appendix C for more details). This means

that in general, professional accountants see it as very important to follow the company rules

and regulations. However, Law and Code still prevails as the prevailing ethical climate despite of

ECQ3 being an item for Rules because the items of Law and code has consistently high means.

On the other hand, ECQ14 (There is no room for ones own personal morals or ethics in

this profession) garnered the lowest mean with 2.4963, which leans towards mostly false. This

means that the application of ones own morals or beliefs instead of laws, Code of Ethics or

standards in situations requiring professional decisions is deemed in appropriate in most cases.

 39

Another thing to consider are standard deviations on a per item basis and mean

standard deviation per ethical climate. The item with the largest standard deviation indicates

lack of consensus among the respondents about their answers. In this regard, it can be

observed that ECQ19 (People are expected to do anything to further the organizations

interests, regardless of the consequences), an item of Instrumental climate, has the highest

standard deviation at 1.0706. This is inconsistent with the requirement that professional

accountants must observe integrity and objectivity in every professional service and therefore

must consider the welfare of the public first before anything else. It can also be observed that

ECQ19 has a consistently high standard deviation across the four sectors of practice, indicating

disagreements of the professional accountants belonging to the same sector of practice

regarding the truthfulness of the item. Therefore, this item can be studied upon by future

researchers in order to determine the cause of relatively high deviations.

As a whole, the general results indicate that Law and Code has the smallest mean

standard deviation per item at 0.7053 which indicates that professional accountants observe

compliance to laws, Code of Ethics and regulations in a consistent manner across the sectors of

practice. on the other hand, Instrumental ethical climate has the highest standard deviation of

0.9882, which means that the respondents have varying experiences regarding the observance

of egoistic behavior in the accounting profession.

B. The Prevailing Ethical Climate per Sector of Practice

This portion of the analysis is done in order to satisfy the second objective of the study

as reflected by the hypothesis below:

HO2: There is no prevailing ethical climate in each of the four sectors of practice in which

professional accountants in the Philippines exercise their profession.

 40

In order to determine the existence of the ethical climates per sector, the general data

used in determining the validity of the first hypothesis is disaggregated based on the sector of

practice of the respondents and then interpreted separately. The following sections will discuss

the prevailing ethical climate per sector of practice.

1. Public Practice

Demographics

The total sample in the public sector is 168. In terms of age, classified according to age

groups with an interval of 5, a majority 93.41% comes from the age group 21 25. 5.39% are

from 26 to 30 years of age. A small fraction of 1.2% and 0.6% are under age groups 31 35 and

56 60 respectively.

In terms of years in practice, the sample will be grouped with an interval of 1; those with

less than 1 year of experience comprise 17.18%. 44.17% has been in service between 1 1.99

years. 17.18% are between 2 2.99 years of service. 11.04% has served his company for 3

3.99 years. Small fractions are represented by: 4 4.99 years with 4.91%, 5 5.99 years with

3.07%, 6 6.99 years 1.22%, none for 7 7.99 and 9 9.99 years while between 8 8.99

years comprises of 6.14%. An extreme case of 30 years of service is 0.61% of the sample.

In terms of position, a majority 84.14% represents rank and file while the remaining

16.46% are managerial/supervisory.

 41

Prevailing Ethical Climate

Instrumenta Caring Independenc Rules Law & Code

l e
2.903030303 3.78915662 3.156626506 4.46385542 4.47023809

7 2 5
2.921686747 3.80120481 3.108433735 4.16167664 4.29166666
Mean per
9 7 7
Question Item 2.339285714 3.30952381 3.240963855 3.42514970 4.45783132

1 5
3.041666667 3.76363636 3.620481928 4 4.14545454

4 5
2.994011976 4.13095238

1
3.042168675 3.443113772
2.988095238 4.31547619
Grand Mean 2.889992189 3.79329485 3.281626506 4.01267044 4.34129765

2 2 8

Table 4.2 Means per question item and grand means per ethical climate of the professional accountants in public

practice.

In the public sector, Law and Code is the prevailing ethical climate with a grand mean of

4.3413. Among the four sectors, public sector may be most regulated considering the

involvement of public practitioners involvement in large accounting scandals such as the Enron.

In the Philippines, the formation of Quality Review Commission (QRCom) which aims to

monitor the quality of public practice, supports this consideration. This degree of regulation

pushes accountants in the public practice to base their ethical decision making on the provision

of laws, Code of Ethics for Professional Accountants and other regulations. Coming in second

is Rules with a grand mean of 4.0127. This is because, aside from the regulation of the

accounting profession, Rules and Law and Code ethical climates are have similar basis on

ethical decisions and they only differ in the scope of consideration.

 42

Caring has the third with a grand mean of 3.7933 while Independence and Instrumental

coming last with grand means of 3.2816 and 2.890 respectively. Numerous standards are

present concerning the services provided by professional accountants in public practice.

Examples are Philippine Standards on Review Engagements for review services, Philippine

Standards on Auditing on audit services and Philippine Standards on Related Engagements for

numerous services. All these standards aim to promote consistency in public practice thus

reducing egoistic approaches. This in turn pushes independence and instrumental last.

Per Item Analysis

On a per item analysis, ECQ2 (People are expected to comply with the law and

professional standards over and above other considerations) garnered the highest mean with

4.470 exemplifying the expectation that public practitioners must comply with the prevailing

laws, Code of Ethics for Professional Accountants and other professional standards (See

Appendix C for more details). The mean shows this mostly to completely true. This ECQ2 also

garnered the lowest standard deviation at 0.5886, emphasizing the consistency of answers.

Similar with the general results and with private practice, ECQ14 has the lowest mean among

the other items at 2.3393.

With respect to standard deviations, it can be observed that ECQ26 (The major

responsibility of people in this profession is to control costs) has that highest standard deviation

at 1.0888. This question addresses the issue of cost control as a major responsibility of a

professional accountant. Though accountants in the public practice are more concerned on the

effectiveness of their performance in rendering professional services, they also perform cost-

benefit analysis so that they can maximize returns. This issue is still not fully agreed upon by the

professional accountants in the public sector.

 43

As a whole, Law and Code has the lowest mean standard deviation at 0.6537 while

Instrumental has the highest at 0.9821 which is consistent with the general results.

2. Private Practice

Demographics

The total number of respondents in this sector is 154. It should be noted that the private

sector houses the second largest number of professional accountants, next to the public sector

based from PICPAs records. The respondents are almost equally divided in the category of

gender, with 53.25% female and 46.75% male. In the age category, 60% of the respondents

belong to ages 21 25, while 26% belongs to ages 26 30. A small fraction of 5% comes from

ages 31 35, and another 5% from 46 55. Moreover, the population is also almost equally

divided in the category of position. 52.26% of the respondents are managers/supervisors, while

the remaining holds rank-and-file positions.

The Prevailing Ethical Climate

Instrumental Caring Independence Rules Law & Code

2.927631579 3.869281046 3.279220779 4.522875817 4.352941176
2.899328859 3.933774834 3.138157895 4.284768212 4.202614379
Mean per 2.45751634 3.296052632 3.225165563 3.470588235 4.467105263
3.045454545 3.743243243 3.516339869 4.006578947 4.138157895
Question Item 3.072368421 4.130718954
2.954248366 3.538961039
3.480519481 4.39869281
Grand Mean 2.976723942 3.844389223 3.289721027 4.071202803 4.290204678

Table 4.3 Means per question item and grand means per ethical climate of the professional accountants in private

practice.
 44

The prevailing ethical climate in the private sector is Law and Code with a grand mean of

4.29. It is followed next by Rules with 4.07, Caring with 3.84, Independence with 3.29, and

Instrumental with the lowest mean of 2.98.

In the case of the private practice, though less regulated than the public sector, the

professional accountants still have the responsibility to abide the law regulating the profession,

the Code of Ethics for Professional Accountants and other regulations. Therefore, despite of the

existence of employee-employer relationship where there is an issue of job security, the

professional accountants in private practice must still exhibit objectivity in performing their

functions. For this reason, Rules which pertain to organization policies is second.

The third highest is Caring ethical climate. This climate is mostly concerned with the

welfare of the people within an organization. But this may be overlooked when codes and rules

are of superior importance to accountants exhibiting objectivity. In the case of professional

accountants, for instance if fraud exists within an organization, responsible persons must be

held accountable even at the expense of personal relationships.

Fourth in the rank is the ethical climate of independence while he last is instrumental

ethical climate, both leaning on somewhat false. These ethical climates have the lowest scores

because the basis of the ethical decisions of the professional accountants must be public

interest rather than self-interest and law, Code of Ethics and regulations rather than personal

morals.

Per Item Analysis

Among the items, the question with the highest mean is ECQ3 (It is very important to

follow the organizations rules and procedures). This is also the item which got the lowest
 45

standard deviation (0.63) which implies consistency from the respondents, with probable

answers being mostly true(4) to completely true (5).

On the other hand, the question with the lowest mean is ECQ 14 (There is no room for

ones own personal morals or ethics in this profession) that is the same in the case of

professional accountants in general and those belonging to the public practice.

Like in public practice, ECQ26 has the highest variance at 1.0554. Despite of working for

business organizations, professional accountants in the private practice dont have a solid

consensus on whether it is their major responsibility to control cost.

As a whole, Rules has the lowest mean standard deviation at 0.5352 while Instrumental

has the highest at 0.9634 which is consistent with the general results. The former deviation

indicates that professional accountants in the private practice agree on what level they should

exhibit the characteristics associated with Rules ethical climate. On the other hand, the latter is

consistent with the general results.

3. Government Practice

Demographics

The sample is composed of a total of 60 on which 73.33% of the sample are female

while the remaining 26.67% are male.

In terms of age, the sample is classified for age groups in multiple of 5. 31.03% is in the

age group 21 25. 39.66% is in the 26 30 group. A small portion of 8.62% is between 31 to 35

years of age, no part of the sample is under the age groups 36 40 and 41 45. Other small
 46

groups are: 3.44% between 46 to 50, 8.62% between 51 to 55, 3.44% between 56 60 and

5.17% between 61 65. No part of the sample is above 65 years of age.

In terms of number of years, the sample is summarized by 5 years in service. Those

who worked for less than a year in government service comprise the 9.61 % while those who

served from 1 to 5 years which is the majority at 61.54%. Those who served between 6 to 10

which comprise 5.77%. No one in the sample had served from 11 to 15 years. 5.77% worked

from 16 to 20 years. Those who served from 21 to 25 years make up 3.85%. Those who served

from 26 to 30 years are 7.69% of the sample while those who are above 30 but under 35 are

5.77%.

Last about demographics is the position. 77.97% are rank and file employees while the

remaining 22.03% are managerial/supervisory positions.

The Prevailing Ethical Climate

Instrumenta Caring Independenc Rules Law & Code

l e
2.933333333 4.06896551 3.466666667 4.55 4.42372881

7 4
2.892857143 4.16666666 3.237288136 4.06666666 4.4
Mean per
7 7
Question Item 2.694915254 3.66666666 3.416666667 3.68333333 4.33898305

7 3 1
3.525423729 3.85 3.672413793 4.03333333 4.35

3
3.169491525 4.25423728

8
3.275862069 3.74576271

2
3.593220339 4.13333333
 47

3
Grand Mean 3.15501477 3.98366174 3.448258816 4.08333333 4.37817796

1 3 6

Table 4.4 Means per question item and grand means per ethical climate of the professional accountants in

government practice.

The prevailing ethical climate in the government practice is Law and Code with a grand

mean of 4.3782 followed by Rules with a grand mean of 4.0833. Law and Code and Rules are

similar in nature that it is based on a prevailing code; the differing factor is the source. Law and

Code follows the generalized rule that is applied to the profession as whole while Rules are

more on company specific. In other words the source of Law and Code is external while Rules

are internal. However, functions and regulations of government agencies are more likely to be

parallel to the regulation that gave its existence. In this regard, there is a close link between Law

and Code and Rules. Example is the Commission of Audit (COA) which existence was laid

down by the Constitution itself. The Constitution specifies its powers, functions and regulations

(this will serve as Law and Code). In line with this, the Rules set out in the COA would be in

conformity with the regulations laid out by the Constitution.

Third in the rank is Caring with an average of 3.98. In the government sector

accountants are spread in various departments, namely, but not limited to, internal audit,

budgeting and office of the auditor. The factor to consider on why Caring came third is the

physical distance of such departments from each other with a special mention to the office of

the auditor and internal audit. A government units financial statement is audited by the sole

auditor of the State, the Commission of Audit (COA). COA typically sends auditors to be resident

external auditors to government agencies. While it is the duty of the COAs auditor to audit the

financial statements, it is the duty of internal audit to audit the operations of such unit. These

two functions require objectivity. The need for objectivity is addressed by maintaining physical

distance of such functions. This distance thus creates a barrier for closeness of CPAs with other
 48

colleagues (both CPAs and non-CPAs). Given that Caring is the consideration of others within

the organization, although there will be caring it wouldnt be the prevailing one given the

considerations mentioned.

Fourth is Independence with an average of 3.4483 and fifth is Instrumental with 3.1550.

The last two pertains to egoistic approaches of ethical climate. That it is centered to self. In the

government sector since there is the absence of profit-based business, self-interest or self-

beliefs are seldom an issue in ethical decision making.

Per Item Analysis

Based on the results, ECQ3 has the highest mean at 4.5500 which means that

government accountants value compliance with organizational rules and procedures. However,

unlike in the business organizations, the rules and procedures in government offices are closely

related to the laws and regulations because of the nature of their work and some of these are

even stated in the laws and regulations. This results to the thinning of the boundaries between

the ethical climates of Law and Code and Rules.

On the other hand, ECQ 9 (In this profession, people are mostly out for themselves) has

the lowest mean at 2.8929, which supports the previous discussion that since government

agencies lack profit motive, such circumstance creates a lesser room for egoistic decision-

making.

In terms of standard deviation, ECQ16 (In this profession, people look out for each

others good) has the lowest at 0.5150. This means that professional accountants in

government practice observe a more consistent degree of care or benevolence with each other.

Meanwhile, ECQ 5 (In this profession, people are expected to follow their own personal and
 49

moral ideals/principles or beliefs) has the highest standard deviation at 1.0809 which may

indicate that they exercise their personal morals in varying degrees within the sector of practice.

Overall, Law and Code has the least mean standard deviation at 0.6345 meaning that

professional accountants in the government sector observe law, Code of Ethics and regulations

consistently. Consistent with the interpretation regarding ECQ5, Independence ethical climate

has the highest mean standard deviation at 0.9621 which means that government accountants

do not agree on what degree they should exercise their personal views and morals with respect

to the practice of their profession.

4. Research and Academe

Demographics

The total number of respondents in this sector is 22. Out of the 22 respondents, 40.91%

are male and 59.09% are female.

In the age category, the following data were gathered: 40.91% of the respondents

belong in the age range 21-25, 27.27% for 26-30, 9.09% for 31-35, 0% for 36-40, 4.54% for 41-

45, 4.54% for 46-50, 9.09% for 51-55, and 4.54% for 61-65.

For the years in practice category, the data gathered were as follows: 54.55% of the

respondents have been in the academe for 1-5 years, 18.18% for 6-10 years, 4.55% for 11-15,

9.09% for 16-20, 4.55% for 21-25, 4.55% for 26-30 and 4.55% for 31-35.

The survey also showed that 86.36% of the respondents belong to the rank and file

position and 13.64% hold managerial/supervisory position.

 50

The Prevailing Ethical Climate

Instrumenta Caring Independenc Rules Law & Code

l e
3.565217391 3.95652173 3.782608696 4 4.17391304

9 3
3.913043478 4 3.590909091 3.95454545 3.95652173
Mean per
Question Item 5 9
3.476190476 3.91304347 3.565217391 3.60869565 3.95652173

8 2 9
3.956521739 3.81818181 3.826086957 4 4.04347826

8 1
3.434782609 4
3.565217391 3.78260869

6
3.391304348 3.86956521

7
Grand Mean 3.614611062 3.90570299 3.691205534 3.89081027 4.03260869

3 7 6

Table 4.5 Means per question item and grand means per ethical climate of the professional accountants in research

and academe.

Based on the grand mean, the prevailing ethical climate is Law and Code with a grand

mean of 4.0326 to be followed by Caring at 3.9057 then by Rules at 3.8908. Independence

places fourth at 3.6912 while Instrumental place fifth at 3.6146.

Consistent with the general result and result of the other sectors of practice, the

prevailing ethical climate Law and Code indicate that the professional accountants in the

research and academe sector uphold laws, Code of Ethics and regulations as primary
 51

considerations when making decisions with ethical implications. Though not as heavily

regulated as the public practice, they are subject to regulations that promote professional

competency as outlined in the Code of Ethics and regulations promulgated by government

agencies.

Ranking in second place is caring which is concerned with the well-being of the people

involved in the organization such as the stakeholders. This is usually manifested though

leadership, fairness, and goodness of those within the organization. Unlike the other sectors of

practice where you deal with managers and colleagues, most of the activities of the professional

accountants in research and academe sector deal with the learning and welfare of the students.

Next in rank is Rules, unlike the other sectors of practice which place Rules immediately

after Law and Code. However, the difference of the grand mean between Rules and Caring is

not that high, which indicates that professional accountants in the research and academe sector

place almost equal weight on organizational rules and welfare of everyone involved with the

organization when making ethical decisions. However, should conflict between the two factors

arise, there is a bigger chance that they will make a course of action reflecting Caring ethical

climate. A good example would be transmutation of grades and giving incentives or extra credits

to students whom instructor thinks are deserving of such.

Independence is the opposite of Rules. If rules are the policies, procedures or things you

have to follow provided by the organization, independence refers to the members own beliefs

and what guides them to do their actions. In the academe, rules prevail over independence.

Teachers may be given the independence on how they carry out their teaching style but in the

end, teachers should cover the syllabus provided by the academe. Also, overriding

independence in the academe may cause unfairness to students. Example, if each teacher is
 52

allowed to follow his or her own grading system, which he or she thinks is appropriate, some

students may benefit and some may not.

Due to the highly regulated nature of the accounting profession, independence and

instrumental are the bottom two which is consistent with the results from the other sectors of

practice and the general result.

Per Item Analysis

The analysis of the means per question item shows that ECQ2 has the highest mean at

4.1739 which is similar with the result public practice. This indicates that the research and

academe sector places laws and professional standards above other considerations.

On the other hand, ECQ26 (The major responsibility of people in this profession is to

control costs) has the lowest mean at 3.3910 which indicates that cost control is not the major

concern in this sector of practice.

With respect to the standard deviations, ECQ1 (The major consideration in my current

organization is whatever is best for everyone) has the lowest standard deviation at 0.8245 which

indicates consensus on up to what degree should they consider the welfare in making

decisions. On the other hand, ECQ3 has the highest standard deviation at 1.1282 which means

that the respondents have a lower degree of agreement on up to what extent should they follow

organizational rules.

In general, Instrumental has the lowest mean standard deviation at 0.9806 while Rules

has the highest at 1.0762. It can be noted that there are only small differences among the mean
 53

standard deviation per ethical climate which indicates high standard deviation in most of

question items. However, the relatively higher discrepancy of the mean standard deviation of

rules support the interpretation of ECQ3 about the lack of agreement on up to what extent

should professional accountants in the research and academe sector follow organizational

rules.

C. Significant Differences of the Ethical Climates per Sector of Practice

Now that the prevailing ethical climates per sector are established, the third objective of

the study can now be addressed by proving or disproving the hypothesis that:

HO3: There are no significant differences among the ethical climates across the sectors.

In order to accomplish this, the researchers segregated the results of the sectors of

practice per ethical climate (e.g. the researchers collected the mean per question item and the

grand mean that corresponds to a certain ethical climate for all the sectors of practice).

Afterwards, the data is tested for normality, through One-Sample Kolmogorov-Smirnov Test and

determination of the quotient of skewness and standard error, and homogeneity of variances,

through significance levels determined by Levenes test. Should the data have normal

distribution and their variances are homogenous, the Analysis of Variance (ANOVA) can be

used. Through the ANOVA statistical treatment, the researchers detected the significant

differences regarding how each sector of practice exhibited a certain ethical climate. This

analysis is supplemented Tukeys Post Hoc Test or Tukeys Honest Significant Difference (HSD)

test, which identifies the sectors of practice with the significant difference with respect to the
 54

means other sectors and by how much such means differ. Through these, the subsets of data

that exists among the sectors based on how they exhibited a certain ethical climate are

determined. The following section will discuss in detail the findings of the study.

1. Instrumental

The tests for normality show that results of the answer to the test items on the

instrumental climate exhibit normal distribution; the One-sample Kolmogorov-Smirnov Test have

an asymptotic significance of 0.066, which is higher than the required 0.05 for the data to be

normal, while the ratio of the skewness and standard error is 0.293, which satisfies the condition

that it falls in the range between +2 and -2 to be normal. On the other hand, the result of

Levenes test shows a significance level of 0.659 which is higher than the desired level of 0.05,

indicating homogeneity of variances (see Appendix D).

The result of the ANOVA shows a computed F value of 9.216 as compared to the tabular

value based on the degree of freedom which is 3.01, indicating significant difference among the

means per sector (see Appendix E). Tukeys HSD shows that among the four sectors, the

academe sector exhibits a significance level lower than 0.05 on all the sectors matched. The

analysis also reveals that the research and academe sector has a relatively higher grand mean

as compared with the other sectors: 0.7246189 higher than public practice sector, 0.6378871

higher than private practice sector and 0.4595963 higher than the government practice sector.

When the results are grouped into subsets, it resulted to two groups with research and academe

sector belonging to one group while the rest of the sectors belong to the other group.

These results of the statistical analyses reject HO3 with regard to the Instrumental

climate and indicate that the research and academe sector perceives that the professional

accountants in the Philippines are exhibiting the traits associated the Instrumental climate more
 55

strongly, or are more egoistic, as compared with the perception of the other sectors. The reason

for such deviation can be looked upon by future studies.

2. Caring

The tests for normality show that results of the answer to the test items on the

instrumental climate exhibit normal distribution; the One-sample Kolmogorov-Smirnov Test have

an asymptotic significance of 0.200, which is higher than the required 0.05 for the data to be

normal, while the ratio of the skewness and standard error is -0.785, which satisfies the

condition that it falls in the range between +2 and -2 to be normal. On the other hand, the result

of Levenes test shows a significance level of 0.125 which is higher than the desired level of

0.05, indicating homogeneity of variances (see Appendix D).

The result of the ANOVA shows a computed F value of 0.594 as compared to the tabular

value based on the degree of freedom which is 3.01, indicating that there is no significant

difference among the means per sector (see Appendix E). Tukeys HSD shows that when the

sectors are matched with each other, there are no significance levels below 0.05, indicating the

absence of significant differences among the means in accordance with the results of ANOVA.

These results of the statistical analyses accept HO3 with regard to the Caring climate,

which means that professional accountants in the different sectors exhibit the Caring ethical

climate at approximately similar levels.

3. Independence
 56

The tests for normality show that results of the answer to the test items on the

instrumental climate exhibit normal distribution; the One-sample Kolmogorov-Smirnov Test have

an asymptotic significance of 0.200, which is higher than the required 0.05 for the data to be

normal, while the ratio of the skewness and standard error is 0.371 which satisfies the condition

that it falls in the range between +2 and -2 to be normal. On the other hand, the result of

Levenes test shows a significance level of 0.818 which is higher than the desired level of 0.05,

indicating homogeneity of variances (see Appendix D).

The result of the ANOVA shows a computed F value of 4.531 as compared to the tabular

value based on the degree of freedom which is 3.49, indicating significant difference among the

means per sector (see Appendix E). Tukeys HSD shows that among the four sectors, the

academe sector exhibits a significance level lower than 0.05 when matched with public practice

and private practice. The analysis also reveals that the academe sector has a relatively higher

grand mean as compared with the two previously mentioned sectors: 0.4095790 higher than

public sector and 0.4014845 higher than private practice sector. It is also 0.2429467 higher than

the government practice sector, though such difference is not significant. It can be noted that

when the results are grouped into subsets, two groups are derived with the research and

academe sector and government sector belonging to one group while the public practice sector,

public practice sector and government practice sector belong the other group. This indicates

that the means of the government sector lies in between the two groups without having a

significant difference on either groups.

These results of the statistical analyses reject HO3 with regard to the Independence

climate and indicate that the research and academe sector perceives that the professional

accountants in the Philippines are exhibiting the traits associated the independence climate

more strongly as compared with the perception of the other sectors. This means that they

observe more cases of professional accountants relying on their personal judgment of right and
 57

wrong in cases that require ethical decisions. The reason for this deviation is subject to

interpretation and further studies must be made in order to provide an objective explanation.

4. Rules

The tests for normality show that results of the answer to the test items on the

instrumental climate exhibit normal distribution; the One-sample Kolmogorov-Smirnov Test have

an asymptotic significance of 0.171, which is higher than the required 0.05 for the data to be

normal, while the ratio of the skewness and standard error is -0.234, which satisfies the

condition that it falls in the range between +2 and -2 to be normal. On the other hand, the result

of Levenes test shows a significance level of 0.628 which is higher than the desired level of

0.05, indicating homogeneity of variances (see Appendix D).

The result of the ANOVA shows a computed F value of 0.222 is lower as compared to

the tabular value based on the degree of freedom which is 3.49, indicating that there is no

significant difference among the means per sector (see Appendix E). Tukeys HSD shows that

when the sectors are matched with each other, there are no significance levels below 0.05,

indicating the absence of significant differences among the means in accordance with the

results of ANOVA.

These results of the statistical analyses accept HO3 with regard to the rules climate,

which means that professional accountants in the different sectors exhibit the rules ethical

climate at approximately similar levels.

5. Law and Code

 58

The tests for normality show that results of the answer to the test items on the

instrumental climate exhibit normal distribution; the One-sample Kolmogorov-Smirnov Test have

an asymptotic significance of 0.200, which is higher than the required 0.05 for the data to be

normal, while the ratio of the skewness and standard error is -0.885, which satisfies the

condition that it falls in the range between +2 and -2 to be normal. On the other hand, the result

of Levenes test shows a significance level of 0.072 which is higher than the desired level of

0.05, indicating homogeneity of variances (see Appendix D).

The result of the ANOVA shows a computed F value of 6.746 as compared to the tabular

value based on the degree of freedom which is 3.49, indicating significant difference among the

means per sector (see Appendix E). Tukeys HSD shows that among the four sectors, the

research and academe sector exhibits a significance level lower than 0.05 on all the sectors

matched. The analysis also reveals that the academe sector has a relatively lower grand mean

as compared to the other sector: 0.3086890 lower than public sector, 0.2575960 lower than

private practice sector and 0.3455693 lower than the government practice sector. When the

results are grouped into subsets, it resulted to two groups with research and academe sector

belonging to one group while the rest of the sectors belong to the other group.

These results of the statistical analyses reject HO3 with regard to the independence

climate and indicate that the research and academe sector perceives that the professional

accountants in the Philippines are exhibiting the traits associated the Law and Code climate less

strongly as compared with the perception of the other sectors. This means that they perceive

that the professional accountants in the Philippines follow rules and regulations to a lesser

extent. The reason for this deviation is subject to interpretation and further studies must be

made in order to provide an objective explanation.

 59

Chapter V: Summary, Conclusion, and Recommendations

Summary of Findings

Based on the results of the survey and the interpretation of the results thereof, the

researchers are now able to accept or reject the hypotheses of the study and thus achieve the

objectives of the study. They are summarized as follows:

1 There exists a prevailing ethical climate among the professional accountants in the

Philippines which is Law and Code.

2 There exists a prevailing ethical climate per sector of practice of the accounting

profession in the Philippines. All sectors exhibit the same prevailing ethical climate which

is Law and Code.

3 Based on the variance analysis results, the means from research and academe sector

show significant differences on how the Instrumental, Independence, and Law And Code

ethical climates are exhibited by the professional accountants as compared with the
 60

other sectors of the practice. On the other hand, Caring and Rules ethical climates are

exhibited uniformly throughout the professional accounting practice in the Philippines.

Conclusion

The prevalence of the ethical climate Law and Code has led the researchers to conclude

that professional accountants in the Philippines in all sectors of practice prioritize laws, Code of

Ethics, professional standards, and other regulations above other considerations as far as

ethical decisions are concerned. Law and Code is what governs not only the accounting

profession but all the other professions as well. Violation of corporate rules might cost a

professional accountant his job; being uncaring and driven by self-interest might cost a CPA his

friends and colleagues, but violation of Law and Code will not only cost a professional

accountant his job but also his profession, integrity and even future prospect.

Therefore, there exists the necessity to implement effective laws, standards and

regulations that would keep the profession in check and that would minimize, if impossible to

completely prevent, opportunities for professional accountants to further their self-interest or of

specified persons at the expense of public welfare. An example of this is the case of fraud of

Enron wherein the auditors still followed the laws, regulations and professional standards by

finding loopholes to be exploited in order for the key management to serve their own interests

(Bowie and Schneider, 2011). Going back to the previous discussion in the review of related

literature, Enron used mark-to-market accounting, special entity vehicles and unusual revenue

recognition. These accounting practices are legal in the sense that standards permit them to do

so. The pre-conditions or requisites for application and corresponding restrictions are not clearly

defined, allowing Enron to maximize such loopholes.

 61

In three of the four sectors, the ethical climate Rules comes second to Law and Code

(with the sector of academe and research being the exception). Going back to the cases of

corporate scandals, this is again evident. Arthur Andersens management has a tone of

prioritizing earnings rather than quality of audits. This priority is internal company Rules, with

employees being loyal to the company. As such, employees are influenced by the tone of the

management (Bowie and Schneider. 2011). This example shows that the internal rules and the

tone at the top also play an important role in ethical decision making. Although Arthur Andersen

management and employees know their public accountability, some of them still decided to be

instrumental to some of the corporate frauds in the United States. Therefore, aside from

polishing laws, standards and codes, there should be a monitoring of companys internal

controls and rules like the requirements presented in Sarbanes-Oxley Act in the United States to

help prevent such scandals happening in our country. Also, the tone at the top needs to be

gauged in order to ascertain whether it is conducive for objective professional accounting

services.

In all sectors, the egoistic approach, as represented by the Instrumental ethical climate,

comes last. This indicates that the accounting profession is not selfish in itself, although some

exceptions are present. This shows a healthy professionalism for accountability of the

accounting profession is to the public rather than private interests.

With regard to the significant differences, it can be noted that only the sector or research

and academe exhibits significant differences in the ethical climates Instrumental, Caring, and

Law & Code. They perceive the professional accountants as more egoistic, more independent

(or follows their own morals more often), and less obedient to laws and regulations as compared

to other sectors. These significant differences indicate the need for further studies in order to

identify the reasons for such deviations. Such studies will be the key in identifying the other

variables affecting the ethical climates of the professional accountants in the Philippines.
 62

Recommendations

The research aims to establish the prevailing ethical climate of the professional

accountants in the Philippines in general and per sector of practice, and whether there are

significant differences on how they are perceived by the four sectors of practice. As such, based

on the limitations and assumptions of the study, there is a need to conduct more specific studies

that would tackle the areas not covered by study in order to provide a more complete picture

regarding the ethical climate of the professional accountants, the factors affecting it, and its

effects on certain organizational aspects. Some of the recommendations for future studies as

provided by the researchers are as follows:

1. Determine the correlation of socio-demographics (e.g. age, gender) and other relevant

organizational factors (e.g. leadership, ethical climate) with ethical climate in relation to

organizational behavior and ethical decision-making.

2. Identify the reasons for the significant differences in the ethical climates in the four sectors of

practice, especially in the research and academe sector.

3. Further studies in the ethical climate of the professional accountants can be directed towards

fraud literature in order to enhance the frameworks explaining fraudulent behavior.

4. A further study if the same essential provisions of the Sarbanes-Oxley Act and other related

regulations could be applied to the Philippines with some revisions due to cultural and political

differences based on the results from studies in ethics dealing with factors affecting ethical

decisions and actions.

 63

5. Determination of the qualitative differences in the work settings and practices of the four

sectors of practice and how such differences affect the ethical climate of a corresponding sector

of practice.

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earnings management. Retrieved from http://commons.ln.edu.hk/cgi/viewcontent.cgi?

article=1013&context=acct_etd

Ogbonna, G.N. & Ebimobowei, A. (2012). Effect of ethical accounting standards on the quality

of financial reports of banks in Nigeria. Current Research Journal of Social

Science , 4(1), 69-78. Retrieved from http://maxwellsci.com/print/crjss/v4-69-78.pdf

Omar, N. & Ahmad, Z. (2014). The relationship among ethical climate, job satisfaction,

organizational commitment, and external auditors turnover intention. Journal of

Modern Accounting and Auditing, 10(2), 164-181. Retrieved from: davidpublishing.org/

DownLoad/?id=15696

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webster.com/dictionary/profession
 66

Robles, S. R. & Empleo, P. M. (2014). Intermediate accounting volume 3 (2013 edition).

Mandaluyong city, Philippines: Millennium Books Inc.

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http://plato.stanford.edu/entries/metaethics/

Simha, A. & Cullen, J.B. (2012). Ethical climates and their effects on organizational

outcomes: implications from the past and prophecies for the future. Academy of

Management Perspectives, 26(4), 20-34.

Shafer, W.E. (2009). Ethical climate, organizational-professional conflict and organizational

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1230/AAAJ_22.7.pdf

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influence. European Scientific Journal December 2013 Special edition, 1, 106-115.

Tervo, W., Smith L. M. & Pitman, M. (2013) Dysfunctional auditor behavior: The effects of the

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Administrative Science Quarterly, 33, pp. 101-125.

 67

Appendix A: Research Instrument

Informed Consent Form

Project Title: The Prevailing Ethical Climate of the Professional Accountants in the Philippines

Researchers: Justin Benedict Arrojado, Izzel Jarviz Arzadon, Dred Dunton, Ariel Joseph Nipas, John

Michael Obien

Objectives of the study:

1 Determine whether there is a prevailing ethical climate among the professional

accountants in the Philippines or none.
2 Determine whether there is a prevailing ethical climate among the four sectors of practice
from which the professional accountants in the Philippines exercise their profession or
none.
3 Determine whether there is a significant difference among the ethical climates across the
sectors or none.

Thank you for your interest in taking part in this research. Before you agree to take part, the persons
organizing the research must explain the project to you.

If you have any questions arising from the explanation already given to you, please ask the researchers
before you decide whether to join in. You may contact them at 09167330100 or at
arieljoseph.nipas@gmail.com

Participants Statement

I agree that:

I have read the notes written above and I understand what the study involves.
 68

I understand that participation in the survey is voluntary and I can refuse to answer any of the
items or withdraw from the survey any time.
I consent to the processing of some of my personal information for the purposes of this research
study.
I understand that such information will be treated as strictly confidential.
I agree that the research project named above has been explained to me to my satisfaction and I
agree to take part in this study.

____________________________ ________________
Signature over printed name Date

ETHICAL CLIMATE QUESTIONNAIRE (ECQ)

Part I: Survey

Instructions: Please help us identify or describe general climate of your profession by

answering the following in terms of how it really is in your profession, not how you would prefer
it to be. Please be as candid as possible. We assure you that all responses will remain strictly
anonymous. There are 26 descriptive statements listed on the following screens. Please check
the following rating scale: 1 as Completely False, 2 as Mostly False, 3 as Somewhat False, 4 as
Mostly True and 5 as Completely True

In my professions work climate . . . (1) (2)Mostly (3) (4) Mostly (5)

Completel False Somewhat True Completel
y False False y True
ECQ1. The major consideration in my
current organization is whatever is best
for everyone.
ECQ2. People are expected to comply
with the law and professional standards
over and above other considerations.
ECQ3. It is very important to follow the
organizations rules and procedures.
ECQ4. In this profession, people protect
their own interest above all else.
ECQ5. In this profession, people are
expected to follow their own personal
and moral ideals/principles or beliefs.
ECQ6. The most important concern in
my current organization is the good of
all the people involved as a whole.
ECQ7. The law or ethical code of the
profession is the major consideration in
 69

making ethical decisions.

ECQ8. Everyone is expected to stick by
the organizations rules and
procedures.
ECQ9. In this profession, people are
mostly out for themselves.
ECQ10. Each person in this profession
decides what is right and wrong for
themselves.
ECQ11. Our major concern is always
what is best for the other person.
ECQ12. In this profession, people are
expected to strictly follow legal or
professional standards.
ECQ13. Successful people in this
profession go by the book and follow
company rules.
ECQ14. There is no room for ones own
personal morals or ethics in this
profession.
ECQ15. The most important concern in
this profession is each persons own
sense of right and wrong.
ECQ16. In this profession, people look
out for each others good.
ECQ17. In this profession, the first
consideration is whether a decision
violates any law.
ECQ18. People in this profession strictly
obey the organizations policies.
ECQ19. People are expected to do
anything to further the organizations
interests, regardless of the
consequences.
ECQ20. In this profession, people are
guided by their own personal ethics.
ECQ21. In this profession, it is expected
that you will always do what is right for
the customers and the public.
ECQ22. People are concerned with the
companys intereststo the exclusion
of all else.
ECQ23. The most efficient way is
always the right way in this profession.
ECQ24. Work is considered
substandard only when it hurts the
professions interests.
ECQ25. In this profession, each person
is expected above all to work
efficiently.
ECQ26. The major responsibility of
people in this profession is to control
costs.
 70

Part II: Personal Information

Instructions: Please check the box that corresponds to your answer.

Name (optional): .

Gender: M [ ] F[ ] Civil Status: Single [ ] Married [ ]

Age:

[ ] 21-25 [ ] 46-50

[ ] 26-30 [ ] 51-55

[ ] 31-35 [ ] 56-60

[ ] 36-40 [ ] 61-65

[ ] 41-45 [ ] Above 65

Current Sector of Practice:

(Should you engage in more than one sector of practice, please select the one where you put
most of your time and effort)

[ ] Public practice

[ ] Private Practice

[ ] Government Practice

[ ] Academe and Research

Position:

[ ] Rank and File

[ ] Managerial/Supervisory

No. of Years in the current Sector of Practice: .

 71

Appendix B: Descriptive Statistics

A. Instrumental Ethical Climate

95% Confidence Interval for Mean

N Mean Std. Deviation Std. Error Lower Bound Upper Bound Minimum Maximum

Public 7 2.889992 .2486830 .0939933 2.659999 3.119986 2.3393 3.0422

Private 7 2.976724 .3017072 .1140346 2.697691 3.255757 2.4575 3.4805
Government 7 3.155015 .3350625 .1266417 2.845134 3.464896 2.6949 3.5932
Academe 7 3.614611 .2281113 .0862180 3.403643 3.825579 3.3913 3.9565
Total 28 3.159085 .3894603 .0736011 3.008069 3.310102 2.3393 3.9565

B. Caring Ethical Climate

95% Confidence Interval for Mean

N Mean Std. Deviation Std. Error Lower Bound Upper Bound Minimum Maximum

Public 7 3.793295 .3522089 .1331224 3.467556 4.119034 3.3095 4.3155

Private 7 3.844389 .3656128 .1381887 3.506254 4.182525 3.2961 4.3987
Government 7 3.983662 .2277893 .0860963 3.772992 4.194332 3.6667 4.2542
Academe 7 3.905703 .0861572 .0325644 3.826021 3.985385 3.7826 4.0000
Total 28 3.881762 .2751073 .0519904 3.775087 3.988438 3.2961 4.3987

C. Independence Ethical Climate

95% Confidence Interval for Mean

N Mean Std. Deviation Std. Error Lower Bound Upper Bound Minimum Maximum

Public 4 3.281627 .2324487 .1162243 2.911749 3.651504 3.1084 3.6205

Private 4 3.289721 .1618694 .0809347 3.032151 3.547291 3.1382 3.5163
Government 4 3.448259 .1789702 .0894851 3.163477 3.733040 3.2373 3.6724
Academe 4 3.691206 .1322623 .0661311 3.480747 3.901664 3.5652 3.8261
Total 16 3.427703 .2352597 .0588149 3.302342 3.553064 3.1084 3.8261
 72

D. Rules Ethical Climate

95% Confidence Interval for Mean

N Mean Std. Deviation Std. Error Lower Bound Upper Bound Minimum Maximum

Public 4 4.012670 .4363148 .2181574 3.318396 4.706945 3.4251 4.4639

Private 4 4.071203 .4525972 .2262986 3.351020 4.791386 3.4706 4.5229
Government 4 4.083333 .3561627 .1780813 3.516599 4.650068 3.6833 4.5500
Academe 4 3.890810 .1892931 .0946465 3.589603 4.192018 3.6087 4.0000
Total 16 4.014504 .3431927 .0857982 3.831630 4.197379 3.4251 4.5500

E. Law and Code Ethical Climate

95% Confidence Interval for Mean

N Mean Std. Deviation Std. Error Lower Bound Upper Bound Minimum Maximum

Public 4 4.341298 .1538652 .0769326 4.096464 4.586132 4.1455 4.4702

Private 4 4.290205 .1483464 .0741732 4.054152 4.526257 4.1382 4.4671
Government 4 4.378178 .0403374 .0201687 4.313992 4.442364 4.3390 4.4237
Academe 4 4.032609 .1027351 .0513676 3.869134 4.196083 3.9565 4.1739
Total 16 4.260572 .1763256 .0440814 4.166615 4.354530 3.9565 4.4702
 73

Appendix C: Test Item Statistics

A. General Results

Standard
No Score Frequencies Mean Variance Deviation
. Ethical Climate 1 2 3 4 5
1 Caring (BL) 7 18 59 252 64 3.87 0.629674185 0.793520123
2 Law & Code (PC) 2 3 20 184 194 4.40198511 0.444971174 0.667061597
3 Rules (PL) 1 5 17 159 220 4.47263682 0.439399015 0.662871794
4 Instrumental (EI) 35 98 140 104 23 2.955 1.085689223 1.041964118
5 Independence (PI) 18 59 153 136 37 3.2853598 0.950705529 0.975041296
6 Caring (BL) 6 13 78 214 89 3.9175 0.677387218 0.823035369
7 Law & Code (PC) 1 11 33 198 161 4.2549505 0.547742181 0.740096062
8 Rules (PL) 2 6 45 211 136 4.1825 0.525507519 0.724918974
9 Instrumental (EI) 33 79 170 92 20 2.96700508 0.973463272 0.986642424
10 Independence (PI) 25 70 138 146 20 3.16541353 0.967544489 0.983638394
11 Caring (BI) 13 36 161 166 27 3.39205955 0.746404454 0.86394702
12 Law & Code (PC) 2 3 30 157 208 4.415 0.499022556 0.706415286
13 Rules (PL) 14 30 133 196 30 3.49131514 0.758008963 0.870637102
14 Instrumental (EL) 73 113 162 49 4 2.49625935 0.920610973 0.959484743
15 Independence (PI) 11 54 168 146 21 3.28 0.743458647 0.862240481
16 Caring (BI) 7 14 79 257 38 3.7721519 0.546938251 0.739552737
17 Law & Code (PC) 2 6 42 223 127 4.1675 0.500695489 0.707598395
18 Rules (PL) 2 11 57 243 88 4.0074813 0.51744389 0.719335728
19 Instrumental (EL) 34 65 141 128 36 3.16584158 1.146125593 1.070572554
20 Independence (PI) 10 31 115 197 47 3.6 0.781954887 0.884282131
21 Caring (BC) 5 14 42 200 142 4.14143921 0.688900411 0.830000248
22 Instrumental (EL) 24 65 184 113 15 3.07481297 0.829389027 0.910707981
23 Caring (EC) 18 35 114 182 54 3.54342432 0.960174315 0.979884848
24 Instrumental (EL) 22 65 192 104 17 3.0725 0.809266917 0.89959264
25 Caring (EC) 3 7 30 192 172 4.29455446 0.550739503 0.742118254
26 Instrumental (EC) 32 45 141 147 39 3.28712871 1.098493969 1.04809063
 74

B. Public Practice

Score Frequencies
No Standard
. Ethical Climate 1 2 3 4 5 Mean Variance Deviation
3.7891566
1 Caring (BL) 1 12 28 105 20 3 0.591639284 0.769180918
2 Law & Code (PC) 0 0 8 73 87 4.4702381 0.346414314 0.588569719
4.4638554
3 Rules (PL) 0 1 7 72 86 2 0.371412924 0.609436563
4 Instrumental (EI) 14 46 56 40 9 2.9030303 1.075905395 1.037258596
3.1566265
5 Independence (PI) 6 34 64 52 10 1 0.884410369 0.940430948
3.8012048
6 Caring (BL) 2 10 37 87 30 2 0.717816721 0.847240651
4.2916666
7 Law & Code (PC) 0 2 13 87 66 7 0.435379242 0.659832738
4.1616766
8 Rules (PL) 1 1 22 89 54 5 0.509847774 0.714036256
2.9216867
9 Instrumental (EI) 17 29 78 34 8 5 0.981708653 0.990812118
3.1084337
10 Independence (PI) 10 32 59 60 5 3 0.909382986 0.953615744
3.3095238
11 Caring (BI) 7 16 71 66 8 1 0.75392073 0.868286088
4.4578313
12 Law & Code (PC) 1 0 9 68 88 3 0.431544359 0.65692036
13 Rules (PL) 5 17 57 78 10 3.4251497 0.751893803 0.867118102
2.3392857
14 Instrumental (EL) 36 50 71 11 0 1 0.788387511 0.887911882
3.2409638
15 Independence (PI) 4 26 70 58 8 6 0.74158452 0.861153018
3.7636363
16 Caring (BI) 5 6 27 112 15 6 0.620620843 0.787794924
4.1454545
17 Law & Code (PC) 0 4 19 91 51 5 0.503104213 0.709298395
18 Rules (PL) 1 4 25 101 36 4 0.518072289 0.719772387
3.0416666
19 Instrumental (EL) 16 32 58 53 9 7 1.106037924 1.051683376
3.6204819
20 Independence (PI) 2 14 46 87 17 3 0.68539613 0.827886544
4.1309523
21 Caring (BC) 2 5 18 87 56 8 0.653407471 0.808336236
2.9940119
22 Instrumental (EL) 12 30 77 43 5 8 0.849361518 0.921608115
3.4431137
23 Caring (EC) 6 22 46 78 15 7 0.910901089 0.954411384
3.0421686
24 Instrumental (EL) 10 28 78 45 5 7 0.804271632 0.896811927
4.3154761
25 Caring (EC) 1 4 14 71 78 9 0.600477616 0.774904908
26 Instrumental (EC) 21 27 63 47 10 2.9880952 1.185486171 1.088800335
 75

C. Private Practice

No Score Frequencies Standard

. Ethical Climate 1 2 3 4 5 Mean Variance Deviation
1 Caring (BL) 4 4 26 93 26 3.869281046 0.667010664 0.816707208
2 Law & Code (PC) 2 2 6 73 70 4.352941176 0.545665635 0.73869184
3 Rules (PL) 0 2 5 57 89 4.522875817 0.395854833 0.629169956
4 Instrumental (EI) 13 39 57 32 11 2.927631579 1.100688393 1.049136975
Independence
5 (PI) 8 17 65 52 12 3.279220779 0.895382395 0.946246477
6 Caring (BL) 3 2 30 83 33 3.933774834 0.648918322 0.805554667
7 Law & Code (PC) 0 7 12 77 57 4.202614379 0.596835225 0.772551115
8 Rules (PL) 0 2 12 78 59 4.284768212 0.445033113 0.667108022
9 Instrumental (EI) 10 35 66 36 2 2.899328859 0.793850898 0.890983108
Independence
10 (PI) 12 20 63 49 8 3.138157895 0.967540955 0.983636597
11 Caring (BI) 5 17 64 60 6 3.296052632 0.713096898 0.844450649
12 Law & Code (PC) 0 1 10 58 83 4.467105263 0.42275183 0.650193686
13 Rules (PL) 7 12 48 74 12 3.470588235 0.842879257 0.918084559
14 Instrumental (EL) 28 49 56 18 2 2.45751634 0.934038528 0.966456687
Independence
15 (PI) 6 20 64 56 5 3.225165563 0.748962472 0.86542618
16 Caring (BI) 1 6 36 92 13 3.743243243 0.491450634 0.701035402
17 Law & Code (PC) 1 2 18 85 46 4.138157895 0.517209829 0.719173018
18 Rules (PL) 0 4 22 95 31 4.006578947 0.456910073 0.675951236
19 Instrumental (EL) 15 26 59 45 9 3.045454545 1.089423648 1.043754592
Independence
20 (PI) 6 9 51 74 13 3.516339869 0.777691778 0.881868345
21 Caring (BC) 2 6 16 75 54 4.130718954 0.719642243 0.848317301
22 Instrumental (EL) 8 25 70 46 3 3.072368421 0.756317532 0.869665184
23 Caring (EC) 9 11 48 60 26 3.538961039 1.08670741 1.042452594
 76

24 Instrumental (EL) 10 28 77 35 3 2.954248366 0.754471964 0.868603456

25 Caring (EC) 0 1 9 71 72 4.39869281 0.399208806 0.631829729
26 Instrumental (EC) 10 13 47 61 23 3.480519481 1.113997114 1.055460617

D. Government Practice

No Score Frequencies Standard

. Ethical Climate 1 2 3 4 5 Mean Variance Deviation
1 Caring (BL) 1 2 3 38 14 4.06896552 0.59165154 0.769188886
2 Law & Code (PC) 0 0 2 30 27 4.42372881 0.31735827 0.563345604
3 Rules (PL) 0 0 3 21 36 4.55 0.35338983 0.594466005
4 Instrumental (EI) 7 12 20 20 1 2.93333333 1.08022599 1.039339208
Independence
5 (PI) 3 8 17 22 10 3.46666667 1.16836158 1.080907758
6 Caring (BL) 0 1 6 35 18 4.16666667 0.44632768 0.668077603
7 Law & Code (PC) 0 1 5 23 31 4.4 0.51525424 0.717812118
8 Rules (PL) 1 1 7 35 16 4.06666667 0.60564972 0.778235001
9 Instrumental (EI) 6 14 19 14 3 2.89285714 1.15194805 1.073288429
Independence
10 (PI) 2 15 14 23 5 3.23728814 1.08065459 1.039545376
11 Caring (BI) 0 2 21 32 5 3.66666667 0.46327684 0.680644427
12 Law & Code (PC) 0 0 8 23 28 4.33898305 0.50379895 0.70978796
13 Rules (PL) 0 0 22 35 3 3.68333333 0.32175141 0.567231357
14 Instrumental (EL) 8 13 27 11 0 2.69491525 0.87083577 0.933185817
Independence
15 (PI) 0 5 30 20 5 3.41666667 0.58615819 0.765609687
16 Caring (BI) 0 0 13 43 4 3.85 0.26525424 0.515028385
17 Law & Code (PC) 0 0 2 35 23 4.35 0.29915254 0.546948391
18 Rules (PL) 0 2 7 38 13 4.03333333 0.47344633 0.688074362
19 Instrumental (EL) 2 5 20 24 8 3.52542373 0.90882525 0.953323265
Independence
20 (PI) 1 6 15 25 11 3.67241379 0.92589232 0.962232985
21 Caring (BC) 0 3 5 25 26 4.25423729 0.67562829 0.821966111
22 Instrumental (EL) 3 8 28 16 4 3.16949153 0.86732905 0.931305024
 77

23 Caring (EC) 2 1 15 33 8 3.74576271 0.71011105 0.842680869

24 Instrumental (EL) 1 6 31 16 4 3.27586207 0.65940714 0.812038877
25 Caring (EC) 1 0 5 38 16 4.13333333 0.49039548 0.700282429
26 Instrumental (EC) 1 1 24 28 5 3.59322034 0.55581531 0.745530223

E. Research and Academe

Standard
Score Frequencies Mean Variance Deviation
No. Ethical Climate 1 2 3 4 5
3.9565217 0.67984189
1 Caring (BL) 1 0 2 16 4 4 7 0.824525256
4.1739130 0.78656126
2 Law & Code (PC) 0 1 4 8 10 4 5 0.886882892
1.27272727
3 Rules (PL) 1 2 2 9 9 4 3 1.12815215
3.5652173 0.80237154
4 Instrumental (EI) 1 1 7 12 2 9 2 0.895751942
5 Independence (PI) 1 0 7 10 5 3.7826087 0.90513834 0.951387587
6 Caring (BL) 1 0 5 9 8 4 1 1
3.9565217 1.04347826
7 Law & Code (PC) 1 1 3 11 7 4 1 1.021507837
3.9545454 0.90259740
8 Rules (PL) 0 2 4 9 7 5 3 0.950051263
3.9130434
9 Instrumental (EI) 0 1 7 8 7 8 0.81027668 0.900153698
3.5909090 1.01515151
10 Independence (PI) 1 3 2 14 2 9 5 1.007547277
3.9130434 1.17391304
11 Caring (BI) 1 1 5 8 8 8 3 1.083472678
3.9565217 1.31620553
12 Law & Code (PC) 1 2 3 8 9 4 4 1.147260011
3.6086956 1.33992094
13 Rules (PL) 2 1 6 9 5 5 9 1.157549545
3.4761904 0.86190476
14 Instrumental (EL) 1 1 8 9 2 8 2 0.92838826
3.5652173 1.07509881
15 Independence (PI) 1 3 4 12 3 9 4 1.036869719
3.8181818 1.20346320
16 Caring (BI) 1 2 3 10 6 2 3 1.097024705
4.0434782 0.86166007
17 Law & Code (PC) 1 0 3 12 7 6 9 0.928256473
18 Rules (PL) 1 1 3 9 8 4 1.14285714 1.069044968
 78

3
3.9565217
19 Instrumental (EL) 1 2 4 6 10 4 1.407114625 1.186218624
3.8260869 1.15019762
20 Independence (PI) 1 2 3 11 6 6 8 1.07247267
0.81818181
21 Caring (BC) 1 0 3 13 6 4 8 0.904534034
3.4347826 0.98418972
22 Instrumental (EL) 1 2 9 8 3 1 3 0.992063367
0.99604743
23 Caring (EC) 1 1 5 11 5 3.7826087 1 0.998021759
3.5652173 1.25691699
24 Instrumental (EL) 1 3 6 8 5 9 6 1.121123096
3.8695652
25 Caring (EC) 1 2 2 12 6 2 1.118577075 1.057628042
3.3913043 0.70355731
26 Instrumental (EC) 0 4 7 11 1 5 2 0.838783233

Appendix D: Test for Normality and Levenes Test

*For One-Sample Kolmogorov-Smirnov Test, the value of Asymptotic Significance (2-tailed)

must be above 0.05 for the data set to be considered normal.

*For test of normality using the skewness of the data, the quotient of the skewness and
standard error must within the range of +2 and -2 to be normal.

*For Levenes Test, the significance level must exceed 0.05 in order to conclude that the
variances are homogenous

A. Instrumental Ethical Climate

One-Sample Kolmogorov-Smirnov Test

Instrumental

N 28
a,b
Normal Parameters Mean 3.159085
Std. Deviation .3894603
Most Extreme Differences Absolute .160
 79

Positive .160
Negative -.140
Test Statistic .160
Asymp. Sig. (2-tailed) .066c
a. Test distribution is Normal.
b. Calculated from data.
c. Lilliefors Significance Correction.
Skewness
Statistic Std. Error Skewness/Std. Error
.129 .441 0.293

Test of Homogeneity of Variances

Instrumental

Levene Statistic df1 df2 Sig.

.540 3 24 .659

B. Caring Climate

One-Sample Kolmogorov-Smirnov Test

Caring

N 28
a,b
Normal Parameters Mean 3.881762
Std. Deviation .2751073
Most Extreme Differences Absolute .129
Positive .053
Negative -.129
Test Statistic .129
Asymp. Sig. (2-tailed) .200c,d
a. Test distribution is Normal.
b. Calculated from data.
c. Lilliefors Significance Correction.
d. This is a lower bound of the true significance.
Skewness
Statistic Std. Error Skewness/Std. Error
-.346 .441 -0.785
 80

Test of Homogeneity of Variances

Caring

Levene Statistic df1 df2 Sig.

2.113 3 24 .125

C. Independence Ethical Climate

One-Sample Kolmogorov-Smirnov Test

Independence

N 16
a,b
Normal Parameters Mean 3.427703
Std. Deviation .2352597
Most Extreme Differences Absolute .174
Positive .174
Negative -.096
Test Statistic .174
Asymp. Sig. (2-tailed) .200c,d
a. Test distribution is Normal.
b. Calculated from data.
c. Lilliefors Significance Correction.
d. This is a lower bound of the true significance.
Skewness
Statistic Std. Error Skewness/Std. Error
.209 .564 0.371

Test of Homogeneity of Variances

Independence

Levene Statistic df1 df2 Sig.

.310 3 12 .818
 81

D. Rules Ethical Climate

One-Sample Kolmogorov-Smirnov Test

Rules

N 16
a,b
Normal Parameters Mean 4.014504
Std. Deviation .3431927
Most Extreme Differences Absolute .181
Positive .127
Negative -.181
Test Statistic .181
Asymp. Sig. (2-tailed) .171c
a. Test distribution is Normal.
b. Calculated from data.
c. Lilliefors Significance Correction.

Skewness
Statistic Std. Error Skewness/Std. Error

-.132 .564 -0.234

Test of Homogeneity of Variances

Rules

Levene Statistic df1 df2 Sig.

.599 3 12 .628
 82

E. Law and Code Ethical Climate

One-Sample Kolmogorov-Smirnov Test

Law

N 16
a,b
Normal Parameters Mean 4.260572
Std. Deviation .1763256
Most Extreme Differences Absolute .172
Positive .117
Negative -.172
Test Statistic .172
Asymp. Sig. (2-tailed) .200c,d
a. Test distribution is Normal.
b. Calculated from data.
c. Lilliefors Significance Correction.
d. This is a lower bound of the true significance.
Skewness
Statistic Std. Error Skewness/Std. Error

-.499 .564 -0.885

Test of Homogeneity of Variances

Law

Levene Statistic df1 df2 Sig.

3.012 3 12 .072
 83

Appendix E: Analysis of Variance and Tukeys Post Hoc Test

A. Instrumental Ethical Climate

ANOVA
Instrumental

Sum of Squares df Mean Square F Sig.

Between Groups 2.192 3 .731 9.216 .000

Within Groups 1.903 24 .079
Total 4.095 27

Multiple Comparisons
Dependent Variable: Instrumental
Tukey HSD

Mean Difference 95% Confidence Interval

(I) Sector (J) Sector (I-J) Std. Error Sig. Lower Bound Upper Bound

Public Private -.0867318 .1505163 .938 -.501947 .328484

Government -.2650226 .1505163 .316 -.680238 .150193

Academe -.7246189* .1505163 .000 -1.139834 -.309403

Private Public .0867318 .1505163 .938 -.328484 .501947
Government -.1782908 .1505163 .642 -.593506 .236925
*
Academe -.6378871 .1505163 .002 -1.053103 -.222672
Government Public .2650226 .1505163 .316 -.150193 .680238
Private .1782908 .1505163 .642 -.236925 .593506
*
Academe -.4595963 .1505163 .026 -.874812 -.044381
*
Academe Public .7246189 .1505163 .000 .309403 1.139834

Private .6378871* .1505163 .002 .222672 1.053103

 84

Government .4595963* .1505163 .026 .044381 .874812

*. The mean difference is significant at the 0.05 level.

Instrumental
a
Tukey HSD

Subset for alpha = 0.05

Sector N 1 2

Public 7 2.889992
Private 7 2.976724
Government 7 3.155015
Academe 7 3.614611
Sig. .316 1.000

Means for groups in homogeneous subsets are

displayed.
a. Uses Harmonic Mean Sample Size = 7.000.

B. Caring Ethical Climate

ANOVA
Caring

Sum of Squares df Mean Square F Sig.

Between Groups .141 3 .047 .594 .625

Within Groups 1.902 24 .079
Total 2.043 27
 85

Multiple Comparisons
Dependent Variable: Caring
Tukey HSD

Mean Difference 95% Confidence Interval

(I) Sector (J) Sector (I-J) Std. Error Sig. Lower Bound Upper Bound

Public Private -.0510944 .1504837 .986 -.466220 .364031

Government -.1903670 .1504837 .593 -.605493 .224759

Academe -.1124081 .1504837 .877 -.527534 .302718

Private Public .0510944 .1504837 .986 -.364031 .466220
Government -.1392726 .1504837 .792 -.554398 .275853
Academe -.0613138 .1504837 .977 -.476439 .353812
Government Public .1903670 .1504837 .593 -.224759 .605493
Private .1392726 .1504837 .792 -.275853 .554398
Academe .0779588 .1504837 .954 -.337167 .493085
Academe Public .1124081 .1504837 .877 -.302718 .527534

Private .0613138 .1504837 .977 -.353812 .476439

Government -.0779588 .1504837 .954 -.493085 .337167

Caring
a
Tukey HSD

Subset for alpha

= 0.05

Sector N 1

Public 7 3.793295
Private 7 3.844389
Academe 7 3.905703
Government 7 3.983662
Sig. .593
 86

Means for groups in homogeneous subsets

are displayed.
a. Uses Harmonic Mean Sample Size =
7.000.

C. Independence Ethical Climate

ANOVA
Independence

Sum of Squares df Mean Square F Sig.

Between Groups .441 3 .147 4.531 .024

Within Groups .389 12 .032
Total .830 15

Multiple Comparisons
Dependent Variable: Independence
Tukey HSD

Mean Difference 95% Confidence Interval

(I) Sector (J) Sector (I-J) Std. Error Sig. Lower Bound Upper Bound

Public Private -.0080945 .1273567 1.000 -.386204 .370015

Government -.1666323 .1273567 .575 -.544742 .211477

*
Academe -.4095790 .1273567 .033 -.787688 -.031470
Private Public .0080945 .1273567 1.000 -.370015 .386204
Government -.1585378 .1273567 .612 -.536647 .219572
*
Academe -.4014845 .1273567 .036 -.779594 -.023375
Government Public .1666323 .1273567 .575 -.211477 .544742
Private .1585378 .1273567 .612 -.219572 .536647
Academe -.2429467 .1273567 .275 -.621056 .135163
*
Academe Public .4095790 .1273567 .033 .031470 .787688

Private .4014845* .1273567 .036 .023375 .779594

Government .2429467 .1273567 .275 -.135163 .621056

*. The mean difference is significant at the 0.05 level.

 87

Independence
Tukey HSDa

Subset for alpha = 0.05

Sector N 1 2

Public 4 3.281627
Private 4 3.289721
Government 4 3.448259 3.448259
Academe 4 3.691206
Sig. .575 .275

Means for groups in homogeneous subsets are

displayed.
a. Uses Harmonic Mean Sample Size = 4.000.

D. Rules Ethical Climate

ANOVA
Rules

Sum of Squares df Mean Square F Sig.

Between Groups .093 3 .031 .222 .879

Within Groups 1.674 12 .139
Total 1.767 15
 88

Multiple Comparisons
Dependent Variable: Rules
Tukey HSD

Mean Difference 95% Confidence Interval

(I) Sector (J) Sector (I-J) Std. Error Sig. Lower Bound Upper Bound

Public Private -.0585323 .2640783 .996 -.842555 .725490

Government -.0706629 .2640783 .993 -.854685 .713359

Academe .1218602 .2640783 .966 -.662162 .905882

Private Public .0585323 .2640783 .996 -.725490 .842555
Government -.0121306 .2640783 1.000 -.796153 .771892
Academe .1803925 .2640783 .902 -.603630 .964415
Government Public .0706629 .2640783 .993 -.713359 .854685
Private .0121306 .2640783 1.000 -.771892 .796153
Academe .1925231 .2640783 .884 -.591499 .976545
Academe Public -.1218602 .2640783 .966 -.905882 .662162

Private -.1803925 .2640783 .902 -.964415 .603630

Government -.1925231 .2640783 .884 -.976545 .591499

Rules
a
Tukey HSD

Subset for alpha

= 0.05

Sector N 1

Academe 4 3.890810
Public 4 4.012670
Private 4 4.071203
Government 4 4.083333
Sig. .884

Means for groups in homogeneous subsets

are displayed.
 89

a. Uses Harmonic Mean Sample Size =

4.000.

E. Law and Code Ethical Climate

ANOVA
Law

Sum of Squares df Mean Square F Sig.

Between Groups .293 3 .098 6.746 .006

Within Groups .174 12 .014
Total .466 15

Multiple Comparisons
Dependent Variable: Law
Tukey HSD

Mean Difference 95% Confidence Interval

(I) Sector (J) Sector (I-J) Std. Error Sig. Lower Bound Upper Bound

Public Private .0510930 .0850461 .930 -.201401 .303587

Government -.0368803 .0850461 .972 -.289374 .215613

*
Academe .3086890 .0850461 .016 .056195 .561183
Private Public -.0510930 .0850461 .930 -.303587 .201401
Government -.0879733 .0850461 .733 -.340467 .164520
*
Academe .2575960 .0850461 .045 .005102 .510090
Government Public .0368803 .0850461 .972 -.215613 .289374
Private .0879733 .0850461 .733 -.164520 .340467
Academe .3455693* .0850461 .007 .093076 .598063
*
Academe Public -.3086890 .0850461 .016 -.561183 -.056195

Private -.2575960* .0850461 .045 -.510090 -.005102

Government -.3455693* .0850461 .007 -.598063 -.093076

*. The mean difference is significant at the 0.05 level.

 90

Law
a
Tukey HSD

Subset for alpha = 0.05

Sector N 1 2

Academe 4 4.032609
Private 4 4.290205
Public 4 4.341298
Government 4 4.378178
Sig. 1.000 .733

Means for groups in homogeneous subsets are

displayed.
a. Uses Harmonic Mean Sample Size = 4.000.
91
92