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    Under Which Conditions are Whistleblowing “Best P...
    research summary posted December 1, 2014 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 14.0 Corporate Matters, 14.02 Corporate Whistle Blowers 
    Under Which Conditions are Whistleblowing “Best Practices” Best?
    Practical Implications:

    The authors’ results suggest that an external reporting channel may overcome an organization’s history of poor responsiveness to whistleblowing as well as decrease the reticence of less proactive individuals to report.  The external anonymous channel thus achieves higher reporting intentions in instances of perceived past negative outcomes of a non-anonymous internal channel and among individuals who by personal trait are less likely to report. Although, the study does not address the likely incremental costs of an external channel, its results suggest no advantage to incurring such additional costs when employees perceive a situation with past positive outcomes.

    For more information on this study, please contact Jian Zhang.


    Zhang, J., K. Pany and P. M. J. Reckers.  2013. Under which conditions are whistleblowing “best practices” best? Auditing: A Journal of Practice and Theory 32(3): 171-181.

    fraudulent financial reporting; anonymous reporting channel; proactivity; whistleblowing.
    Purpose of the Study:

    Public companies are required by the Sarbanes-Oxley Act of 2002 to establish an anonymous reporting (whistleblowing) channel for employee reporting of questionable accounting practices.  Corporate audit committees are provided flexibility in implementing this requirement and a controversial choice is the type of reporting channel.  The purpose of the study is to examine the efficacy of externally administered versus internally administered channels.

    Use of an externally administered hotline generally has been considered a “best hotline practice” in that it is likely to lessen the reporter’s hesitation to become involved. That is, arguably, an externally administered hotline is perceived to provide a heightened likelihood of action and favorable outcome, including a reduced likelihood of whistleblower detection through greater confidentiality. This is consistent with tenants of the theory of planned behavior.  Nonetheless, this topic is controversial because such externally administered hotlines are not cost free and because some suggest that there may be a general hesitancy on the part of some individuals to report externally. 

    Design/Method/ Approach:

    The study’s participants, 130 MBA students with an average of nine years work experience, responded to differing forms of a research instrument which systematically manipulates the administrator of an anonymous reporting channel (internal vs. external), and the company’s previous whistleblowing outcomes (positive or negative to the previous non-anonymous whistleblower). The research instrument describes a current fraudulent act that violates GAAP revenue recognition principles and asks respondents about the likelihood that they would report the act.

    • The authors find that the preference for external whistleblowing channels may be conditional upon the perceived lack of past success of internal channels to produce good outcomes and an employee overall proactivity characteristic.
    • The authors find that the external anonymous channel achieves higher reporting intentions in instances of perceived past negative outcomes of a non-anonymous internal channel, but not when past outcomes had been positive to a whistleblower.
    • The authors find that highly proactive participants (as measured by a frequently used scale) were not influenced by the reporting channel, whereas less proactive participants reported a greater likelihood of reporting to an externally administered hotline.
    Corporate Matters, Risk & Risk Management - Including Fraud Risk
    Corporate Whistle Blowers, Fraud Risk Assessment