Does Viewing Sacrificed Integrity as a Negotiable Cost Promote Acceptance of Fraud

ABSTRACT: The accounting profession relies heavily on professional integrity to control fraud and abuse; yet we know little about the relationship between integrity and fraud. We propose that integrity influences accountants' attitudes about fraud through rational calculations of risk and reward, where accountants weigh the loss of integrity against potential returns. We adapt and test a model that incorporates outcome bias and framing in an experiment with student participants (n = 86). When confronted with financial statement fraud, the likely outcome of the fraud influences attitudes about integrity, and integrity mediates the effect of the likely outcome of the fraud on attitudes toward the fraud. This finding suggests that attitudes about integrity partially determine attitudes about fraud. However, we argue that accountants' attitudes about integrity are corruptible, meaning the profession cannot rely on self-regulation alone to control fraud and abuse.