The moral decision-making process of corporate internal auditors
Authors: Cheng-Tsung Lu, Dauw-Song Zhu, Yeun-Wen Chang
Journal: Chiao Da Management Review. Dec. 2014, 34(2): 51-86.
Keywords: Moral decision-making process; Moral maturity; Obedience pressure
Abstract:
The “Persons of the Year” chosen by Time Magazine in 2002 were three whistle-blowers, one of whom was the
internal audit manager of WorldCom. Although WorldCom eventually declared bankruptcy, the internal audit
manager had disclosed the illegal practice of the company and reported to the board of directors. Compared
with external auditors, internal auditors have significantly better understandings of the familiarity with
operation processes. Most of the studies on auditors’ moral decision making focus on external auditors, few
studies have examined the moral decision-making development of internal auditors. Based on the moral
development model of Rest (1986), this study involves audit issues (moral intensity), contextual factors
(obedience pressure), and personal factors (moral maturity) to discuss the determinants affecting the moral
decision-making of internal auditors. The research subjects are internal auditors of companies listed on the
Taiwan Stock Exchange and Taiwan OTC Exchange. One hundred fifty-seven response questionnaires were
collected, and the hypotheses were verified by structural equation model. Empirical results show that: (1)
moral intensity has a positive effect on moral judgment; (2) moral maturity is also a critical factor
affecting moral judgment; (3) obedience pressure has a negative effect on moral recognition and moral
judgment; (4) moral perception affects moral judgment, and moral judgment affects moral intention of
internal auditors. Our result is consistent with the moral development model proposed by Rest (1986).