The Impact of Authority on Reporting Behavior, Rationalization and Affect

We conduct an experiment to examine reporting choices, rationalizations, and emotional responses when an authority figure directs participants to misreport. Several accounting scandals reportedly involved an authority figure instructing subordinates to perpetrate fraudulent financial reporting. For example, Scott Sullivan, WorldCom's chief financial officer (CFO), testified in court that he was told by Bernie Ebbers, the chief executive officer (CEO), "we have to hit the numbers" (Latour and Young 2005). Subordinates of HealthSouth's Richard Scrushy claimed that he threatened their jobs if they did not alter financial information (Stuart 2005). These fraud examples are consistent with Stanley Milgram's (1974) controversial research on obedience to authority in which more than 60 percent of participants followed an unethical authority figure's directions.