Are Permanent and Temporary Management Accountants Equally Likely to Manage Earnings? Evidence from the Netherlands

There is a developing trend to hire temporary accountants and financial managers to fill open positions or to manage specific finance and accounting projects. It is unclear whether this trend poses a threat to the integrity of organizations' accounting data. On the one hand, accountants who are only loosely connected to the organization may care less about its future and may therefore not employ the same standards of professional ethics as permanent staff. On the other hand however, exactly because their future does not depend on the success of the organization, temporary accountants may find it easier to cope with managerial pressure to accept questionable accounting practices and to remain objective and independent. In this paper, we use survey data to examine the effect of contract type (permanent versus temporary) on management accountants' earnings management acceptance. We find that temporary accountants judge ethically questionable accounting practices more harshly. Our data furthermore suggest that ethical orientation, but not professional commitment, mediates the relation between contract type and earnings management acceptance. These findings have some important implications for research and for business practice