Whistle-blowing by external auditors: seeking legitimacy for the South African audit profession?

Auditing is often cited as playing an important role in managing agency-related costs and, accordingly, being integral to the sound functioning of capital markets. There may, however, be more to the attest function than a technical rational practice. By virtue of relying heavily on claims to technical expertise, professionalism, prudential judgement and public confidence, auditing is both a source of legitimacy for organisations and, paradoxically, dependent on claims to legitimacy for its continued existence. From this perspective, recent regulatory developments, purportedly enacted to increase arms-length control over the profession, may not only be about improving perceived audit quality and practice but also about ensuring continued faith in the well-established ‘rituals’ of the assurance function. A reporting duty imposed on South African external auditors, akin to whistle-blowing, is used as a case study to explore this perspective. In doing so, this paper contributes to the scant body of interpretive research on auditing, simultaneously offering one of the first insights into auditing regulation from an African perspective.

Chief Audit Executives’ Evaluations of Whistle-Blowing Allegations

This study examines the effects of the source of whistle-blowing allegations and potential for allegations to trigger concerns about reputation threats on Chief Audit Executives’ handling of whistle-blowing allegations. The participants for this study, 79 Chief Audit Executives (CAEs) and deputy CAEs, evaluated whistle-blowing reports related to financial reporting malfeasance that were received from either an anonymous or a non-anonymous source. The whistle-blowing reports alleged that the wrongdoing resulted from either the exploitation of substantial weaknesses in internal controls (suggesting higher responsibility of the CAE and internal audit) or the circumvention of internal controls (suggesting lower responsibility of the CAE or internal audit). Findings indicate that CAEs believe anonymous whistle-blowing reports to be significantly less credible than non-anonymous reports. Although CAEs assessed lower credibility ratings for the reports alleging wrongdoing by the exploitation of substantial weaknesses in internal controls, they allocated more resources to investigating these allegations.

A comparative study of the effect of web-based versus in-class textbook ethics instruction on accounting students' propensity to whistle-blow

The authors examined whether accounting students’ propensity to whistle-blow differed between those instructed through a web-based teaching module and those exposed to a traditional in-class textbook-focused approach. A total of 156 students from a second-year financial accounting course participated in the study. Ninety students utilized the web-based module whereas 66 students were instructed through a traditional teaching approach based on ethical problems presented in the textbook. Subsequently, when presented with a whistle-blowing situation, it was found that students exposed to a web-based ethics instruction module were more likely to whistle-blow than those students exposed to a traditional in-class textbook ethics instruction approach.

Too good to leave, too bad to stay: anti-retaliation precautionary measures for whistle blowers

Whistle blowing is an act of exposing the wrongdoings in an organization, either committed by its members of the lower level or the top management. Many have agreed that whistle blowing is an effective means of deterring and detecting organizational mishaps. Whistle blowers have been referred to as canaries in the coal mine. The idea of telling the truth however, may result in exposure to uncontrolled risk by the whistle blower. The extent to which the whistle blower is protected and safe after information is leaked to the public or the relevant authority remains unknown. In the Malaysian context, whistle blowing is not new. Being honest is a custom among Malaysians. Honesty is deeply rooted in Malaysian culture and is supported by the high value Malaysian place on spiritual belief which also put a premium on moral virtue. But being loyal to the management is another thing. A critical issue that whistle blowers face is the tension between the virtues of honesty and the virtues of loyalty. The ethical dilemmas faced by the whistle blowers place them in situations where there are significant and difficult ethical conflicts. Recently, the Parliament of Malaysia has passed the Whistle Blowing Protection Act which was seen as an holistic approach to cover all Malaysians who were willing to blow the whistle. Some do not feel confident that such program under the Act can be accomplished in Malaysia as the Malaysian culture believing keeping things to ourselves. Thus the paper intends to explore the anti-retaliation precautionary factors mediate by the culture that will most likely explain motivational issues subordinates face in publicizing the wrongs that are harmful to the organization in Malaysia.

Empirical evidence of lack of significant support for whistleblowing

Whistleblowing has often been regarded as an intrusion into the commercial functioning of organisations, and whistle-blowers have frequently found their career prospects to go into steep decline. Recent evidence, however, suggests that individuals in organisations are increasingly being encouraged to report wrongdoings, with whistle-blowing being highlighted as an effective method of reducing the costs of fraudulent activities. This single organisation case study finds that many employees are still reluctant to report wrongdoings in their workplace. This is particularly the case in respect of male employees. It is also found that those employees who do whistle-blow are motivated by feelings of loyalty towards their organisation, rather than by self-interest.

Police misconduct and crime : bad apples or systems failure?

There is a debate in the research literature whether to view police misconduct and crime as acts of individuals perceived as 'rotten apples' or as an indication of systems failure in the police force. Based on an archival analysis of court cases where police employees were prosecuted, this paper attempts to explore the extent of rotten apples versus systems failure in the police. Exploratory research of 57 prosecuted police officers in Norway indicate that there were more rotten apple cases than system failure cases. The individual failures seem to be the norm rather than the exception of ethical breaches, therefore enhancing the rotten apple theory. However as exploratory research, police crime may still be explained at the organizational level as well.

Markets and microstructure

This document contains three papers examining the microstructure of financial interaction in development and market settings. I first examine the industrial organization of financial exchanges, specifically limit order markets. In this section, I perform a case study of Google stock surrounding a surprising earnings announcement in the 3rd quarter of 2009, uncovering parameters that describe information flows and liquidity provision. I then explore the disbursement process for community-driven development projects. This section is game theoretic in nature, using a novel three-player ultimatum structure. I finally develop econometric tools to simulate equilibrium and identify equilibrium models in limit order markets.

In chapter two, I estimate an equilibrium model using limit order data, finding parameters that describe information and liquidity preferences for trading. As a case study, I estimate the model for Google stock surrounding an unexpected good-news earnings announcement in the 3rd quarter of 2009. I find a substantial decrease in asymmetric information prior to the earnings announcement. I also simulate counterfactual dealer markets and find empirical evidence that limit order markets perform more efficiently than do their dealer market counterparts.

In chapter three, I examine Community-Driven Development. Community-Driven Development is considered a tool empowering communities to develop their own aid projects. While evidence has been mixed as to the effectiveness of CDD in achieving disbursement to intended beneficiaries, the literature maintains that local elites generally take control of most programs. I present a three player ultimatum game which describes a potential decentralized aid procurement process. Players successively split a dollar in aid money, and the final player--the targeted community member--decides between whistle blowing or not. Despite the elite capture present in my model, I find conditions under which money reaches targeted recipients. My results describe a perverse possibility in the decentralized aid process which could make detection of elite capture more difficult than previously considered. These processes may reconcile recent empirical work claiming effectiveness of the decentralized aid process with case studies which claim otherwise.

In chapter four, I develop in more depth the empirical and computational means to estimate model parameters in the case study in chapter two. I describe the liquidity supplier problem and equilibrium among those suppliers. I then outline the analytical forms for computing certainty-equivalent utilities for the informed trader. Following this, I describe a recursive algorithm which facilitates computing equilibrium in supply curves. Finally, I outline implementation of the Method of Simulated Moments in this context, focusing on Indirect Inference and formulating the pseudo model.

Managing whistleblowing : the significance of quality standards

This research studies the relationship between the existence of whistle blowing procedures and the level of importance placed on whistleblowing procedures, in an environment that claims to have a quality culture. Organisations certified with a basic quality standard, ISO 9000, were surveyed in three separate industries. Certified organisations were selection on the assumption of a basic knowledge and understanding of quality concepts as well as heightened chance of exiting whistleblowing procedures. A combination of quantitative and qualitative data analysis was undertaken. The investigation resulted in evidence that neither the existence of whistleblowing procedures, nor the level of importance placed on whistleblowing procedures, could be predicted by the presence of a quality culture. This investigation highlights the importance of whistleblowing procedures, and identifies further research opportunities on this contentious topic.

Civil service reform oversight, 1980--whistleblower [microform] : hearings before the Subcommittee on the Civil Service of the Committee on Post Office and Civil Service, House of Representatives, Ninety-sixth Congress, second session. ...

Reuse of record except for individual research requires license from Congressional Information Service, Inc.

Whistleblowers : management of the program to protect trucking company employees against reprisal : report to the Chairwoman, Subcommittee on Government Activities and Transportation, Committee on Governement [sic] Operations, House of Representatives /

"B-231224"--P. [1].

Whistleblower protection : survey of federal employees on misconduct and protection from reprisal : fact sheet for the Chairman, Subcommittee on the Civil Service, Committee on Post Office and Civil Service, House of Representatives /

"B-249141"--P. [1].

How well does OSHA protect workers from reprisal : inspector opinions /

"November 16,1989."