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Power Distance and Ethics In Accounting Workplaces

Logan Graham
University of Kentucky


Geert Hofstede ran numerous tests to find out if there were different functions on how cultures
communicate with one another. What Hofstede found was there were many types of
communication that cultures use on a daily basis and called them dimensions. Power distance is
one of the many dimensions that Hofstede invented. The dimension that is mentioned above, will
be applied in the accounting workplace, more focused on big accounting firms around the world.
Power distance is applied to the accounting workplace on how there is a wide spread of
inequality in pay and distribution of power. Also cultural norms, such as accounting ethics, will
mention on how shared behaviors, beliefs, and values revolve around the accounting work place;
in terms of relationships between accountants and clients, but also how ethics plays a role in the
workplace norm. Hofstedes dimensions impact the accounting workplace on how workers
interact with their clients and how they communicate with each other.


Power Distance and Ethics: Shaping the Accounting Workplace

Power distance is one of Hofstedes cultural dimensions and he described it as The
extent to which members of a culture expect and accept the power will be equally or unequally
shared (Young, 2013). Power distance can further be broken down into two parts: Low-power
and High-power distance. Low-power distance is what people want power to be equal across the
culture. Low-power distance characteristics would be: Older people are neither respected nor
feared, corruption is rare; scandals end political careers, and income distribution is fairly even
across the society (Hofstede, 2011). Smaller accounting firms experience low-power distance
relationships. Smaller firms tend to have fewer workers and mostly everybody is equal in pay;
seniority doesnt play a significant role in the workplace. Lastly, corruption is very rare in
smaller accounting firm because the size of the company and relationship of the clients and the
accountants; more of the corruption and relationships between workers and clients will be
mentioned later.
High-power distance is the exact opposite of low-power distance, by definition it is, the
view of unequal power distribution is normal (Young, 2013). Of course, high-power distance
would the exact opposite in terms of its characteristics, such as: older people are both respected
and feared, hierarchy means existential inequality, people of a lower status are expected to be
told what to do, income distribution in society is uneven, and lastly, corruption is frequent and
most scandals are covered up (Hofstede, 2011). In the bigger accounting firms, mostly the Big
4 have some sort of hierarchy system that is implemented with seniority as a key component.
With that statement, people with more experience and the more time theyve put in the company,


they get more prestigious titles and move up the ladder over everyone else. Because of this
ladder, the older people are usually both respected and feared, but also it shows that there is an
existing inequality because of the hierarchy in the workplace. People who have a higher college
degree versus people have more experience, tend to have an income distribution that is skewed.
Accountants who start off early on their job tend to be paid less than more experienced people.
When accountants start off with a higher degree than everyone else but with little experience, the
higher educated accounts will make more money than some of the more experienced accountants
and the new ones.

In table A1 and A2, the two charts provide information on having a CPA versus not having a
CPA and how the CPA certification affects the salaries on the accounting titles. Clearly, having a
CPA increases the salary of a particular accountant title by an average of $8341.67. Table 1.1
and 1.2 clearly show an inequality between salaries pays of the same job titles, but with different
educations. Lastly, in high-power distance there are usually problems between the client and the
worker in terms of having a good sense of ethics. Later, close relationships and behaviors can
result into corruption and ethical issues due to high-power distance.
Culture is a shared set of behaviors, values, and beliefs. Just like any job in this world,
accounting has their own culture. Accounting has cultural norms, how the workers act around
other worker and their clients, values and beliefs that affect their job such as professional ethics.
Accountants and clients share a very special relationship with each other that is a part of the
culture. Accounting services, mostly big firms, requires interdependent relationships (Li &
Zheng, 2010). They require this special relationship because the clients need to have a reliable


company that handles their financial work and the clients dont want to have different companies
work with their financial statements all the time. Clients prefer to have long trusting relationships
with accountants. But, these relationships that started off small, tend to grow into business
partnership (Li & Zheng, 2010). Because of these close relationships that are developing, the
public considers it to be Original Sin because there is possible influence in ethical issues and
How does the relationship between the accountants and the clients influence unethical
behaviors that lead to scandals? The most important influence on these behaviors is how the
accountant presents their opinions and attitudes. In a study by Qinqin Zheng and Zhiqiang Li
(1998), they focused on two questions on how the accountants opinion affect the clients: What
is the proper influence mode of accounting firms encountering clients immoral behaviors during
the service deliver and what factors of accounting firms might affect the clients immoral
behavior (p. 137)? The answer to the first question, Zheng and Li found that both the firms and
the clients both are in operation for immoral activities. According to Li and Zhengs research
(2010), The client is usually the initiator because of the unintentionally provide some incorrect
or biased information to pursue self-interest (p. 138). Accounting firms choose to encounter the
clients unethical behavior in a positive, no (neutral), or negative way (Li & Zheng, 2010). In a
positive influence, the accountants give their clients unbiased information, efficient performance
given by the accountants, and lastly, the clients and workers have an open relationship so they
can perform excellent ethics. Negative influence of ethics is that the client bribes the worker with
money or sources of entertainment. Another form of negative influence is that ones political
views dominate the decisions that are made whether the worker is right or wrong. Lastly, another
negative influence is that the clients pressure the worker to do something in the favor of the


clients for their own benefit. These influences could be used in different ways, for a positive
way, the clients and workers work for whats honorable and not beneficial. In a negative way,
the clients and workers work to what beneficial to each other, using their own views or pressure
to get their own ways; causing the workplace to be unhealthy to be in. When looking at
accounting ethics, the clients and accountants ten to share negative influences to each other.
Ethics is one of the most important concepts in accounting workplaces. Without ethics,
accountants are never seen to be trustworthy, have no creditability in their work causing the
accountant to be unsuccessful in their job. To understand how ethics is important to accounting
culture, ethics must be explained and understood first. Ethics is based off of three main theories,
justice, rights, and utilitarianism, all of which apply to accounting ethics. The theory of justice
explains how justice should mean that all is fair and equal to all status in a workplace (Senaratne,
2011). The theory of rights mentions that legal and natural rights function in accounting
workplace (Senaratne, 2011). Lastly, Professor Samanthi Senaratne illustrates that,
utilitarianism as the greatest happiness principle (the principle of utility), which measures good
and bad consequences in terms of happiness and pain (Senaratne, 2011). The concepts of ethics
is an important cultural norm to accounting workplaces, but the application of ethics is more
important in the workplace.
Accountings norms are centered on the workers ethics. The three ethics mentioned by
Professor Samanthi Senaratne above, are the main ideas of ethics that are applied to professional
accounting workplaces around the world. Most accountants work for a client for a fee, which
makes them a public accountant. As previously mentioned, the accountants and clients are
bounded by an interdependent special relationship. Because of this special relationship, the
accountants are relied upon to fulfill their commitment on having a positive ethical conduct.


Ethical conduct includes honesty, integrity, objectivity, due care, confidentiality, and the
commitment to serve the public interest before their own (Senaratne, 2011). These ethics have
set the standard form what is right from what is wrong in the moral behaviors that the public
expects. Most of the smaller accounting firms that arent widely known, tend to have the least
amount of issues with ethics and they arent as publicized as accountants working for big
corporations such as Enron. Accountants that are involved with large corporations, such as
Arthur Andersen, have usually not followed the ethical standard that accountants usually do. The
accountants tend to focus on technical issues and lack ethical sensitivity when ethical issues arise
in their work, leading to making wrong professional decisions (Senaratne, 2011).
The Enron scandal was one of the biggest scandals of all time. Enron was one of the
biggest corporations in the United States, the leader in natural gas services. In the late 1990s,
Enron was seen as the strongest corporation on Wall Street, but in 2001 the company files for
bankruptcy leaving tens of thousands of shareholders with anger and holes in their pockets.
Would could have led a financial success to a financial meltdown in less than five years? What
led to this horrific meltdown was the ethical issues inside Enron. Accounting ethics was a huge
factor in the scandal. Enron forced Arthur Andersen (Enrons accounting firm) to operate errors
in the books to show that Enron was doing well in the financial market (Silverstein, 2013) .
Because the accounts of Enron complied with Enron on their wrong doings, Arthur Andersen
and the corporation had proved that ethics were an important deal to the professional workplace.
If Arthur Andersen would have followed the ethical standards that they had committed as being
an accountant, then the both Enron and Arthur Andersen might still be here to this day and
leaving shareholders more content with their Enron stocks. Since the corporation and the
accountants of Arthur Andersen got in trouble by the Securitas and Exchange Commission, many


of them arrested for accounting fraud, embezzlement, and conspiracy. If some of the
accountants, werent charged for those crimes, their reputation is crippled because they would be
label as an accountant with no business ethics and no company will want to have any relations
with that type of accountant. The lesson of the Enron scandal is that, for better or worse, the
accountants job is to do what is right for the company, not for what looks good for the CEOs
and the corporation; because Arthur Andersen did not follow the proper ethics for accounting,
the firm collapsed with Enron. The Enron scandal has also proved how ethics is important to
accountants and the professional workplace because if ethics is used morally wrong, then the

accountants and the corporations will have to pay the price for the wrong decisions.

The comic that is showed in the previous page, relates to the Enron scandal and how a
former accountant that worked with Arthur Andersen. The comic talks about how an employer
notices that the accountant had worked for Arthur Andersen before the firm collapsed. The
accountant had attempted to shred the work experience with Arthur Andersen, but failed to do
so. The interviewer would likely not hire this accountant because he would not trust the
accountant because he worked for a corporation that has a horrible reputation of accounting


ethics. The comic compliments to what is stated above in regards of an accountant trying to find
of job because of Arthur Andersens unethical accounting practices. Because of the reputation
the corporation has but on this accountant, the accountant is going to struggle on finding a job
that he could be trusted to work for.
Accounting or work ethics shapes who accountants are in the world. In the workplace, the
ethics is a major part in any relationship between the accountants and their clients. Without an
accounting work ethic code of conduct, businesses like Enron would produce more scandals and
immoral practices that affect the economy indirectly. To prevent these scandals from happening,
Professor Samanthi Senaratne insisted that there should be an emphasis on ethics education as a
core component of accounting education (Senaratne, 2011). With education, accountants can
apply learned ethics into their daily accounting culture and they can prevent future immoral
practices that damage corporations and themselves.
Power distance and accounting ethics are important in forming relationships between
accountants, clients, and other accountants in the workplace. Both power distance and
accounting ethics have positives and negatives. Low-power distance seems to have the best
advantages because it benefits everyone in the workplace equally. Accountants that have more
experience are almost just as equal to the accounts with less experience. Also with low-power
distance, income distribution, corruptions, and scandals are rare to find in the workplace; that
creates more equality around the workplace. Accounting ethics positives are that the worker and
client relationships are trustful and moral; keeping a healthy workplace working. Although
workplace strive for the positives but some face the negative side to power distance relationships
and accounting ethics. High-power distance is polarized to low-powered distance, high-power
distance usually has unequal share in power. The unequal share of power leads to income


distribution to be uneven and usually causes companies to participate in large scandals due to
ethical issues, such as the Enron scandal. The accounting workplace has its own culture like any
other place in the world. Business professional environments like accounting, faces conflicts in
relationships between the accountants and their clients. These conflicts arise because of the
immoral institutions and the high-power distance relationships that the accountants and clients
share. Hofstede created the theory of power distance relationships, although he didnt imply the
theory to the accounting culture, his theories are accurately used on a daily basis.



Becker Professional Education. (2014). What You Can Earn As a CPA. Retrieved from
Hofstede, G. (2011). Dimensionalizing Cultures: The Hofstede Model in Context. Online
Readings in Psychology and Culture, 2(1).
Li, Z., Zheng, Q. (2010). The Influence of Accounting Firms on Clients Immoral Behaviors in
China. Journal of Business Ethics, 91, 137-149. doi: 10.1007/s10551-010-0573-4
Silverstein, K. (2013). Enron, Ethics And Todays Corporate Values. Retreived from
Summers, D. (2002).
Retrieved from
Young, M. (2013). Cultural Influences on Accounting and Its Practices. 1-45. Retrieved from


Appendix A

Large Public Firms

Non-CPA Salaries Up To

CPA Salaries*** Up To

Senior Manager/Director****









1 to 3 Years



Up to 1 Year



Corporate Accounting

Non-CPA Salaries Up To

CPA Salaries*** Up To

Chief Financial Officer****



Tax Director****



Corporate Controller****



IT Auditor - Manager



Financial Analyst - Manager



General Accountant - 1 to 3 Years



Table A1

Table A2