ETHICAL DECISION-MAKING ASSIGNMENT 1
Ethical Decision Making in Accounting Assignment
Nicholas Steven Cox
School of Business, Liberty University
ACCT 642: Accounting Ethics (D01)
Dr. Darnell Huntley
November 10, 2025
Abstract
Ethical decision-making matters. Ethical decision-making is required by the accounting
profession because accountants safeguard information that organizations, governments,
investors, and the public use to make decisions. Ethical decision-making failures weaken
stakeholder trust, distort the markets, and harm the interests. Understanding how ethical
decision-making forms needs a look at the development of judgment. Behavioral factors shape
action. I evaluate the two frameworks in this paper: Kohlberg’s Cognitive Moral Development
Theory and Rest’s Four-Component Model of Ethical Decision Making. Kohlberg explains how
individuals move through the stages of reasoning. Rest shows how the ethical sensitivity, the
judgment, the ethical motivation, and the ethical character work together to produce behavior.
The paper looks at how each model influences the culture, conduct, and compliance with the
AICPA Code of Professional Conduct. The discussion also brings in principles that support moral
growth and ethical action. The discussion shows that the biblical teachings line up with both
Kohlberg and Rest frameworks. The alignment between the teachings and the two theoretical
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frameworks shows a link between faith and moral development. Using thinking development,
behavior motivation, and the Holy Bible guidance can help the accounting profession.
Keywords: Kohlberg’s Cognitive Moral Development Theory, Rest’s Four-Component
Model, AICPA Code, Ethical decision-making in accounting, Accounting ethics, moral reasoning,
Due care, Ethical sensitivity, Ethical judgment, Ethical motivation, and Ethical character, Internal
auditors and whistleblowing.
Introduction
The accounting profession relies on ethical decision-making because professionals
safeguard vital financial data that businesses, governments, investors, and the public rely on for
accurate information. Organizations need to make ethical decisions because financial reporting
integrity requires them to follow strict regulations, meet client needs, and perform according to
expectations. Mintz and Miller (2025) emphasize that professionals must navigate ongoing
moral dilemmas, as they must choose between fulfilling client needs, following firm rules, and
safeguarding public welfare. The public interest suffers when ethical misconduct occurs because
it creates market distortions and harms business reputations, reduces investor trust, and
endangers public welfare.
The process of ethical decision-making by accountants needs analysis of psychological
factors that influence moral judgment and behavioral aspects that support ethical conduct. The
two main frameworks of Kohlberg’s Cognitive Moral Development Theory and Rest’s
FourComponent Model provide separate yet interconnected explanations about ethical decision
development, moral reasoning advancement, and the reasons behind unethical behavior.
Through his theory, Kohlberg explains how people develop their moral judgment abilities, while
Rest demonstrates that the behaviors, motivations, and personal characteristics are needed to
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execute ethical decisions. The assessment of accounting ethical competence is achieved through
the combination of these two theoretical frameworks. This foundation sets the stage for
exploring Kohlberg's theory of ethical cognition analysis before moving to Rest's model, which
combines behavioral elements with motivational factors and character-based components to
establish a complete ethical system.
Research Method
This research paper utilizes a literature review methodology, drawing primarily from
peer-reviewed journal articles published between 2020 and 2025. Academic databases such as
ProQuest and EBSCOhost were searched using relevant keywords, "Kohlberg’s Cognitive Moral
Development Theory," "Rest’s Four-Component Model," "AICPA Code," "Ethical decisionmaking
in accounting," "accounting ethics," "moral reasoning," "Due care," "Ethical judgment,"
"Ethical motivation," "Ethical character," and “Internal auditors and whistleblowing.” Only
English-language, peer-reviewed sources directly relevant to ethical decision-making in
accounting were used.
Kohlberg’s Cognitive Moral Development Theory
Overview of Moral Development
The Cognitive Moral Development Theory of Kohlberg describes how people advance
through three stages of moral understanding, which include pre-conventional, conventional,
and post-conventional levels. People who exist at the pre-conventional stage choose their
ethical actions based on following orders, avoiding punishment, and seeking personal
advantages. The pre-conventional level in accounting settings emerges when professionals
follow rules to avoid penalties rather than demonstrating actual ethical dedication.
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People who operate at the conventional level base their moral decisions on following
social rules, maintaining group unity, and showing loyalty to others. The majority of working
adults remain at this stage because they choose to follow their supervisors, maintaining team
cohesion and meeting client needs, even when these actions violate ethical standards.
The highest stage of post-conventional reasoning requires individuals to adhere to
universal ethical principles, which include justice, fairness, truthfulness, and respect for rights.
People who operate at this level defend their integrity through ethical decisions, which often
result in financial expenses for themselves and their organizations. The professionals maintain
absolute transparency while upholding their professional values, regardless of any pressure that
comes from clients or firm leadership.
Application to Accounting Practice
Kohlberg’s model provides a framework for seeing how accountants face dilemmas.
Accountants at various stages of development tend to resist the unethical pressure to report
misconduct and to uphold professional principles. Research by Antoh (2024) suggests that
internal auditors who work at the reasoning stages have a willingness to reveal unethical
behavior. Endenich and Trapp (2020) also demonstrate that accountants with ethical reasoning
are more resilient to the manipulative influences that exist within the organizational control
structures. Kohlberg’s theory illustrates how people think about right and wrong. Kohlberg’s
theory does not explain why some people do not do the thing they think is right. That missing
piece points to Rest’s model. Rest’s model examines how people move from thinking about right
and wrong to doing the right thing.
Rest’s Four-Component Model of Ethical Decision Making
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Ethical Sensitivity
The Four-Component Model of Rest goes beyond cognitive ethics because moral conduct
needs more than problem-solving abilities. Ethical sensitivity refers to the ability to detect
ethical issues in particular circumstances makes up ethical sensitivity. The ability to detect
unusual journal entries, identify potential signs of fraud, and manage professional conflicts of
interest represents ethical sensitivity in accounting work. The study by Laine et al. (2024)
demonstrates that ethical sensitivity has become increasingly vital because automated
accounting systems diminish our capacity to detect ethical risks.
Ethical Judgment
The evaluation process of multiple choices leads to selecting actions that maintain
ethical standards, which defines ethical judgment. The component applies Kohlberg's cognitive
method to resolve real-world problems. Shaban and Barakat (2023) demonstrated through their
research that internal auditors who exhibit excellent ethical judgment abilities achieve better
results when assessing internal control weaknesses and risk factors, as well as compliance with
professional standards.
Ethical Motivation
People who follow an ethical motivation base their decisions on ethical principles,
regardless of the circumstances. The work of accountants exposes them to multiple challenges
that stem from their need to please clients, maintain their employment status, meet
performance targets, and fulfill their firm's obligations. The research by Ariail et al. (2024)
suggests that management accountants face ethical challenges because their organizations
reward them for producing financial reports that are overly aggressive. A person needs to
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demonstrate an authentic commitment to defending public interests and following professional
ethics to develop ethical motivation.
Ethical Character
People who want to follow their ethical beliefs need to show courage, determination,
and persistence according to the definition of ethical character. Professionals must demonstrate
ethical behavior by facing their superiors, opposing unreasonable client requests, and upholding
financial reporting accuracy. The research by Poje et al. (2025) demonstrates that students with
strong ethical character are more likely to resist unethical pressures when performing their
duties. Rest’s model demonstrates that professionals need to develop character strength to
perform their ethical decision-making duties. The research findings on ethical models establish a
clear connection to assess their impact on the ethical work environment of accounting
professionals.
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Evaluation of Both Models in the Organizational Culture of Accounting
Implications of Kohlberg’s Theory
The theory of Kohlberg shows how organizational culture shapes the ethical reasoning
development of professionals. Organizations that support ethical leadership and transparent
communication about ethical issues and ethical decision-making processes enable their
professionals to develop their moral competencies. Organizations that focus on client retention,
revenue targets, and internal compliance often create environments that lead professionals to
think at conventional levels instead of developing internal principles for ethical decision-making.
Organizations need to actively develop ethical skills through reflective dialogue and
ethicsbased training programs and spaces that enable staff members to challenge unethical
orders, in line with Kohlberg's model of moral development. The exclusive use of compliance
training fails to foster principled thinking because it teaches employees to follow rules instead of
making ethical decisions. Organizations that support the development of critical thinking and
moral autonomy will create professionals who demonstrate ethical resilience. The cognitive
elements of Kohlberg's model form the basis for Rest's framework, which demonstrates how
cultural elements affect ethical conduct.
Implications of Rest’s Model
Rest’s model demonstrates that organizational culture shapes employee ethical thinking
and their actual moral conduct. The ability of employees to report concerns depends on their
sense of workplace safety, which determines their ethical sensitivity. Organizations should
implement real-world dilemma analysis through case studies and scenario-based training
programs to enhance employee ethical decision-making abilities. Organizations that reward
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ethical conduct and penalize unethical behavior foster employee motivation for ethical behavior
because they show that ethical values are more important than financial rewards. Leaders who
show brave, ethical behavior and defend employees who demonstrate integrity enable their
organization to develop ethical character.
Organizations need to take ethical responsibility according to Rest's framework because
they should not expect their employees to handle this duty. Organizations need to foster a
culture of psychological safety, support whistleblowing activities, and maintain ethical standards
to minimize unethical behavior. The assessment of organizational effects on ethics needs to
examine the theoretical links between the AICPA Code of Professional Conduct.
Influence of Both Models on the AICPA Code of Professional Conduct
Alignment with Core Ethical Principles
Kohlberg’s model and Rest’s model both fit the AICPA Code of Professional Conduct.
Kohlberg’s model and Rest’s model each add support to the duties that accounting professionals
must follow under the AICPA Code of Professional Conduct. Rest’s model calls for acting with
integrity and keeping objectivity. Acting with integrity and maintaining objectivity aligns the
duties listed in the AICPA Code of Professional Conduct, ET §0.300.040 and ET §0.300.050
(American Institute of Certified Public Accountants, 2025, ET §0.300.040; ET §0.300.050). The
behavioral element of Rest's model also reinforces the standards in ET §1.100.001 for integrity
and objectivity (American Institute of Certified Public Accountants, 2025, ET §1.100.001).
Ethical sensitivity and ethical judgment enable accountants to identify conflicts, threats,
and ethical risks (American Institute of Certified Public Accountants, 2025, ET §1.100.001). The
General Standards Rule requires care, competence, and professional discipline, as outlined in ET
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§1.300.001 (American Institute of Certified Public Accountants, 2025, ET §1.100.001). Upholding
ethical principles matters. When accountants follow principles, they show the consistency that
members of the profession expect. When accountants follow principles, they also keep the
credibility and trust that the public places in accountants.
Together, these models strengthen the Code’s practical and philosophical foundation,
demonstrating that ethical competence requires both cognitive maturity and behavioral
discipline.
This alignment transitions directly into the practical implications for daily accounting practice.
Practical Implications for Professional Conduct
The combined insights of both models give ideas for accountants. I see that ethical
behavior must be built on purpose, with training that grows reasoning and character strength. I
think professionals must learn not the rules but how to interpret the rules with moral ideas and
how to use them when pressure is high. I notice that firms must back behavior by making a
culture where professionals can question assumptions, raise concerns, and push back on
requests.
The models promote the mental and behavioral discipline of professional skepticism,
which is a component of accounting and auditing. Kohlberg’s theory makes skepticism stronger
by using higher-level thinking. Rest’s model makes sure that motivation and character keep
skepticism alive in situations. These practical ideas show that the two models work together.
They give a base for comparing and contrasting the models.
Comparison and Contrast of the Models
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Similarities Between the Models
The two frameworks of Kohlberg and Rest share multiple fundamental similarities. The
two frameworks show that people develop their ethical thinking abilities through their
environment, which includes leadership, cultural norms, and peer group expectations. The two
models show that ethical decisions result from mental operations, yet human beings show
varying levels of moral principle comprehension. The two frameworks support that people can
develop their ethical abilities through learning, self-reflection, and work experience.
Differences in Ethical Emphasis
Even though the models share the foundations, they differ a lot in their range and focus.
Kohlberg’s theory looks at how individuals think about ethical issues. Kohlberg’s theory shows
why professionals may reach judgments depending on the stage of moral thinking. Kohlberg’s
theory does not show why individuals do not act on their beliefs when they are under pressure.
The Rests model fills the gap by focusing on ethical behavior. Rest's model points out the need
for sensitivity, motivation, and character. Sensitivity, motivation, and character decide if a
person follows an action. In accounting practice, ethical action often means authority or risking
client relationships. Rests emphasis on motivation and character matters a lot in accounting
practice. Rest emphasis matters.
These differences demonstrate that Kohlberg provides the cognitive foundation for
ethical reasoning, while Rest offers the behavioral framework necessary for ethical action. This
distinction naturally transitions into a biblical evaluation of each model, which adds spiritual
depth to the ethical analysis.
Biblical Worldview Analysis
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Biblical Support for Cognitive Moral Development
The biblical worldview reinforces the growing part of reasoning that Kohlberg describes.
The biblical worldview tells believers to grow in wisdom, understanding, and discernment.
Proverbs 12:22 (Holy Bible: New International Version, 2011) says God delights in truthfulness. I
think that truthfulness matches the ideas of later-stage reasoning. Hebrews 5:14 (Holy Bible:
New International Version, 2011) says mature believers have trained themselves to tell good
from evil. This description mirrors Kohlberg’s claim that moral reasoning develops through
practice, reflection, and character building.
The Holy Bible teaches people to develop inner moral change rather than just merely
following the rules. In essence, the Holy Bible mirrors Kohlberg's development from following
rules to using personal principles. The scripture Psalm 119:11 (Holy Bible: New International
Version, 2011) states, " I have hidden your word in my heart that I might not sin against you."
This scripture teaches us to make God's word a part of our being, which supports the need for
internal moral development that Kohlberg describes. The biblical principles support Kohlberg's
cognitive approach to moral development, which in turn leads to the behavioral aspects that
Rest's model examines.
Biblical Support for Ethical Action in Rest’s Model
The biblical text supports Rest's approach to transform moral understanding into
practical ethical conduct. The Bible, through James 1:22, teaches believers to perform the word
instead of listening to it only because Rest emphasizes that knowledge of right actions requires
actual execution. The passage in Philippians 1:9–10 shows ethical sensitivity because it instructs
believers about their need to develop their ability to discern things. Through James 1:5,
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believers obtain divine wisdom, which enables them to make ethical decisions. Believers need
to work with genuine sincerity according to Colossians 3:23–24 because they serve the Lord.
Through Joshua 1:9 and comparable scriptures, believers receive encouragement to develop
moral strength through their practice of courage and determination.
These principles require people to understand their actions while making careful
decisions, maintaining personal dedication, and showing constant moral strength. The principles
from Rest's model match the qualities needed for ethical conduct, which include awareness and
evaluation, and internal commitment and steadfast character. The biblical integration
demonstrates that these theories function effectively for Christian professionals who need
complete ethical direction to practice contemporary accounting.
Conclusion
Ethical decision-making is the heart of the accounting profession. The accounting
profession needs decision-making to keep its credibility and to serve the interests. I have
learned that Kohlberg’s Cognitive Moral Development Theory shows how moral reasoning
grows. I have learned that Rest’s Four-Component Model shows how ethical behavior works
through sensitivity, judgment, motivation, and character. The models together give a framework
for understanding and improving conduct. The framework helps the organization shape the
culture. The framework guides the practice. The framework supports following the AICPA Code.
The models show their value to the profession. When the biblical worldview looks at both
models, both models support the ideas of truth, justice, honesty, and right action. The
accounting profession can mix the approach and the behavioral approach to ethics. The
accounting profession then builds environments that grow courage, make ethical strength
greater, and keep trust.
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References
American Institute of Certified Professional Accountants. (2025). Code of Professional Conduct.
http://pub.aicpa.org/codeofconduct/Ethics.aspx
Antoh, A. (2024). A perspective on the whistleblowing intention of internal auditors. Cogent
Business & Management, 11(1). https://doi.org/10.1080/23311975.2023.2292817
Ariail, D. L., Smith, K. T., Smith, L. M., & Khayati, A. (2024). An examination of ethical values of
management accountants. Journal of Business Ethics, 195(2), 407–423.
https://doi.org/10.1007/s10551-024-05640-z
Endenich, C., & Trapp, R. (2020). Ethical implications of management accounting and control.
Journal of Business Ethics, 163(2), 309–328. https://www.jstor.org/stable/45283700
Holy Bible. (2011). New International Version. Bible Gateway.
https://www.biblegateway.com/passage/?search=Proverbs%2012%3A22&version=NIV
Laine, J., Minkkinen, M., & Mäntymäki, M. (2024). Ethics-based AI auditing. Information &
Management, 61(5). https://doi.org/10.1016/j.im.2024.103969
Mintz, S. M., & Miller, W. F. (2025). Ethical obligations and decision making in accounting:
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Poje, T., Ličen, M., & Zaman Groff, M. (2025). Who enrolls in accounting? Ethical predispositions
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