Emotional Reactions to Financial Statement Fraud

Prior research suggests that evaluating employee reactions can help understand the human costs of unethical behavior. However, there is limited research exploring emotional reactions to unethical behavior and no studies that explore emotional reactions when financial statement fraud occurs. In an attempt to fill a gap in the literature, the purpose of this study is to explore whether practicing accountants feel certain negative emotions when asked by a member of management to manipulate earnings. We find that practicing accountants feel emotions of anger, disappointment, and regret when asked by a member of management to complete an action that results in financial statement fraud. The implications of these findings are discussed.