A Test of the Selection-Socialization Theory in Moral Reasoning of CPAs in Industry Practice

Abstract

ABSTRACT: This paper investigates the Selection-Socialization Theory (SST) and its related Inverted-U Phenomenon (IUP) in the moral reasoning of Certified Public Accountants (CPAs) in industry and public practice. This is an extension of the literature that has primarily focused on CPAs in public practice and has reported mixed results. We do not find significant differences in moral reasoning (as measured by the P-score of the Defining Issues Test) between various professional ranks of practicing accountants. This result suggests an absence of SST or IUP in promotions of CPAs to higher ranks in industry or public practice. Investigation of control variables indicates that gender and ethical training do not have significant effects on the P-score. However, as expected, CPAs with graduate degrees have higher P-scores than those with only an undergraduate degree, and politically moderate or liberal CPAs score higher than conservatives.