4. Self Deception And Rationalization Flashcards
Bazermans factors
Ambiguity Attachment Approval Familiarity Discounting Escalation
Ambiguity (Bazerman factor) (apply to fraud case)
Flexibility on revenue recognition
Attachment (Bazerman factor) (apply to fraud case)
Golden handcuffs, pristine audits from EY
Approval (Bazerman factor) (apply to fraud case)
More likely to agree with a suggestion from others that confirms your existing bias (eg auditor would approve a suggestion already proposed by a client)
Familiarity (Bazerman factor) (apply to fraud case)
Nobody gets hurt
People keep their jobs
Discounting (Bazerman factor) (apply to fraud case)
favor near term, assume you can make it up next quarter, don’t think ahead to ultimate outcome
Escalation (Bazerman factor) (apply to fraud case)
Commit to make #s then start with small scale questionable accounting than create an ever growing and unsustainable gap between true and claimed growth path
Escalation mechanisms
Psychological
Coverup
Lock-in
Psychological escalation
Each incremental step isn’t much worse given what you’re already doing
Coverup escalation
Telling additional lies to cover up past deception
Lock-in escalation
In Ling run difficult to sustain earnings manipulation or any misleading projection
Cognitive Dissonance Theory
A drive or feeling of discomfort caused by holding two or more inconsistent cognitions
I did something unethical for no good reason
I am generally a good person
Defensive biases
Motivated forgetting
Revising your view of what’s ethical
Denial of responsibility (external justifications and excuses)
Denial of consequences
Ethical switching (compartmentalizing)
Trivialization of consequences
Meaningless gestures /moral credentialing
Better than average effect
Relative to the rest of your classmates or peers you think your percentile will be higher than your peers
4 Gs to guide ethical decisions
Greed (self interest)
Gut (intuitions)
Guilt (personal discomfort)
Groups (social norms)
