This article argues that a consensus interpretation of epistemological objectivity and related principles of rationality make it possible to conduct a rational and objective debate about the merits of alternative financial reporting practices. Whereas previous studies have attributed many debates to fundamentally different ontological and epistemological presuppositions, here it is argued that instead many of the debates involve opposing normative commitments to financial reporting objectives. This conflict over objectives is explored by examining the normative assertions of three opposing perspectives (critical-interpretative, economic consequences, and external user). Implications for the institutional legitimacy of standard-setting bodies, the search for “generally accepted” international accounting standards, and accounting research are discussed.

This study uses experimental markets to investigate how moral reasoning influences auditor reporting under different levels of economic incentives. In each multiperiod market, auditor subjects could either (1) misreport low observed outcomes as high and thereby reap economic advantages at the expense of third‐party investors, or (2) truthfully report low observed outcomes as low but thereby forgo the economic advantages of misreporting. We extend the Calegari, Schatzberg, and Sevcik 1998 experimental‐markets setting to incorporate moral reasoning, and test hypotheses based on the economic model of Magee and Tseng 1990 and the neo‐Kohlbergian moral reasoning framework of Rest, Narvaez, Bebeau, and Thoma 1999. We document a significant effect of moral reasoning on auditor behavior. Specifically, we find that misreporting and premium fees are more likely with higher than with lower moral reasoning subjects, and the moral reasoning effect diminishes as economic penalties increase in the market. These findings provide valuable insights for specifying the determinants of auditor misreporting, the observable behaviors that signal its existence, and the institutions that can prevent its occurrence in the market. We conclude that the relation between moral reasoning and behavior is more complex than commonly assumed in the accounting literature, and identify directions for future research.