Cognitive Processes and Ethical Decision Making in Accounting (Chapter 02)

A comprehensive set of vocabulary-style flashcards covering cognitive processes, biases, moral development theories, ethical decision-making models, organizational ethics, and related concepts from the lecture notes.

System 1 thinking

An intuitive, fast, automatic mode of processing information that is quick, effortless, and emotional.

System 2 thinking

A slower, reasoned decision process that is deliberate, conscious, and effortful.

Cognitive biases

Unconscious, systematic deviations from rational thinking that affect judgment and decision making.

Incrementalism (slippery slope)

Gradual acceptance of unethical actions, where past choices influence future behavior; often treated as immaterial in fraud contexts.

Bystander effect

Tendency not to report wrongdoing or help others, assuming others will intervene.

Cognitive dissonance

Tension from holding conflicting beliefs or attitudes and behavior; motivation to resolve the conflict.

Hindsight bias

Tendency to view events as more predictable after they have occurred.

Ethnocentrism

Belief that one’s own group is superior; us-versus-them mentality.

Stereotypes

Generalized beliefs about a group that can bias judgment and behavior.

Overconfidence bias

Excessive confidence in one’s own judgments or abilities.

Oversimplification bias

Reducing complex issues to overly simple explanations.

Loss aversion bias

Preference to avoid losses rather than acquiring equivalent gains.

Authority bias

Tendency to give greater accuracy to the opinion of an authority figure regardless of evidence.

Conformity bias / Groupthink

Tendency to align with group opinions, suppressing dissent and critical thinking.

Moral sensitivity

Ability to recognize and identify moral/ethical issues in a situation.

Moral judgment

Reasoning about right and wrong and selecting among ethical alternatives.

Moral motivation

Willingness to place ethical values ahead of non-ethical values in decision making.

Moral character

Consistency between one’s ethical intentions and actions.

Moral intent

Internal commitment to act ethically; alignment of virtues with intended action.

Rest’s Model of Morality

James Rest’s four-component framework for ethical action: moral sensitivity, moral judgment, moral motivation, and moral character.

Kohlberg’s stages of moral development

Three levels (Preconventional, Conventional, Postconventional) with six stages showing the complexity of moral reasoning.

Level 1 Preconventional

Stage 1: Obedience to rules to avoid punishment; Stage 2: Egoism—following rules to satisfy personal needs.

Level 2 Conventional

Stage 3: Fairness and loyalty in relationships; Stage 4: Law and order; duty to society and authority.

Level 3 Postconventional

Stage 5: Social contracts and rights; Stage 6: Universal ethical principles.

Integrated Ethical Decision-Making Model

Four-step framework: identify issues (sensitivity), evaluate alternatives (judgment), reflect on moral intensity/virtues (intent), take action (behavior).

Giving Voice to Values (GVV)

Behavioral ethics approach focused on articulating and enacting one’s values; uses rehearsed arguments to overcome barriers.

GVV questions

Guiding questions to prepare how, to whom, and when to voice one’s values and address pushback.

Ethical climate

Moral atmosphere within an organization shaped by leaders and shared values; emphasis on ethical norms like EDI.

Ethical culture

Explicit values, beliefs, and norms guiding behavior in an organization.

Tone at the top

Ethical environment created by leadership’s example and priorities.

Code of ethics

Formal document outlining standards of professional conduct and guiding decision making.

Equity, Diversity, and Inclusion (EDI)

Policies and practices promoting fair opportunity and inclusive, bias-free environments.

Organizational ethics

Principles and standards guiding behavior across an organization.

Intellectual virtues (auditing)

Virtues influencing professional judgment: integrity, truthfulness, independence, objectivity, diligence, skepticism.

Instrumental virtues (auditing)

Virtues influencing actions: diligence, alertness, carefulness, resourcefulness, persistence, courage.

Kant’s categorical imperative

Moral principle that one should act only on maxims that could be universal laws.

Ends justify the means (utilitarian idea)

Moral theory where outcomes determine the morality of actions; some argue the end justifies the means.

Rule utilitarianism

Moral rules are right if they generally produce the greatest good.

Rights

Fundamental entitlements protecting individuals’ life, liberty, and property.

Materiality

Significance of information or a misstatement; fraud lacks materiality thresholds in some contexts.

Locus of responsibility

Where accountability for actions is perceived to lie (individual, organizational, or systemic level).

Locus of loyalty

Tension between loyalty to a group and ethical obligations; can influence decision making.

Moral intensity

Severity or urgency of an ethical issue, influencing moral decision making.