Behavioural Framework for Managing Conflicts of Interest in Professional Accounting Firms

Maria Ishaque,Fatima Yusuf,Rexford Attah‐Boakye

doi:10.1111/1467-8551.12490

Maria Ishaque, Fatima Yusuf + Show 1 more

Open Access

https://doi.org/10.1111/1467-8551.12490

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Abstract

AbstractThis paper proposes a behavioural framework to complement professional accounting firms’ measures for managing conflicts of interest. Following an empirical examination of the process through which conflicts of interest affect accounting professionals’ decision‐making, we develop guidance for practitioners that will enable them to incorporate behavioural interventions while establishing the context, assessing, treating, controlling and monitoring conflicts of interest. The interventions are aimed at strengthening accounting professionals’ independence in fact by increasing the professionals’ expectation that compliant decision‐making will result in positive outcomes, increasing their perception that making compliant decisions is less difficult than making the alternative decisions, facilitating the formation of highly ethical judgements and lowering their propensity to disengage.The data were collected through a quasi‐experiment with 105 professionals from the Big Four accounting firms in the UK. Our work offers practical implications for professional accountants, executive directors, regulatory bodies, executive training and academic research. Other professions facing the ramifications of conflicts of interest (e.g. law, engineering, medicine and architecture) may also use the proposed framework to improve their ethics policies and corporate governance codes for managing conflicts of interest.

Highlights

The accumulative levels of ‘noise and bias’ in judgement can increase business and operational risk (Kahneman et al, 2016)
Our study provides a unique insight into accounting professionals’ decision-making behaviour; it proposes various interventions that will enable these professionals to assess, treat, control and monitor conflicts of interest in an effective way
We argue that conflicts of interest are a behavioural and complex cognitive phenomenon, which should be captured by a comprehensive analytical framework

Summary

Introduction

The accumulative levels of ‘noise and bias’ in judgement can increase business and operational risk (Kahneman et al, 2016). Yusuf advances the recent behavioural accounting literature by providing empirical evidence for how conflicts of interest affect accounting professionals’ decision-making behaviour It combines social cognitive theory (Bandura, 2008) with the throughput model of decision-making (Rodgers and Fayi, 2019) to explain the relationship between the conflicts of interest and accounting professionals’ likelihood of engaging in compliant decision-making. It provides an account of how accounting professionals’ positive outcome expectancy, perceived difficulty and ethical judgement affect their decision-making behaviour. Our study provides a unique insight into accounting professionals’ decision-making behaviour; it proposes various interventions (using statistical models) that will enable these professionals to assess, treat, control and monitor conflicts of interest in an effective way.

Literature review

Materials and methods