Under Which Conditions are Whistleblowing “Best Practices” Best?

2013 ◽  
Vol 32 (3) ◽  
pp. 171-181 ◽  
Author(s):  
Jian Zhang ◽  
Kurt Pany ◽  
Philip M. J. Reckers
Keyword(s):  
Best Practices ◽  
Audit Committees ◽  
Behavioral Experiment ◽  
Public Companies ◽  
Anonymous Reporting ◽  
Sarbanes Oxley ◽  
Main Effect ◽  
History Of ◽  
Reporting Channel ◽  
Reporting Intentions

SUMMARY: 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. Most commentators argue that “best practices” call for an externally administered “hotline.” To examine the efficacy of externally administered versus internally administered channels we conducted a behavioral experiment. Our results reveal a significant main effect with reporting intentions being greater if the hotline is administered externally. We then examine whether this finding is robust across selected environmental and employee-specific conditions and find that it is not. Our results suggest that the primary reporting benefits of an externally administered hotline are for organizations with a history of poor responsiveness to whistleblowing and for employees registering relatively low on the proactivity scale. Specifically, we find that an externally administered hotline obtains higher reporting intentions under conditions wherein a previous incidence of whistleblowing notably failed to achieve a good outcome. Also, this effect is only statistically significant for participants registering as relatively low on a “proactivity” scale.

An Examination of the Effects of Procedural Safeguards on Intentions to Anonymously Report Fraud

2009 ◽  
Vol 28 (2) ◽  
pp. 273-288 ◽  
Author(s):  
Steven E. Kaplan ◽  
Kurt Pany ◽  
Janet A. Samuels ◽  
Jian Zhang
Keyword(s):  
Experimental Study ◽  
Internal Control ◽  
Experimental Studies ◽  
Audit Committees ◽  
Great Flexibility ◽  
Public Companies ◽  
Ancillary Study ◽  
Anonymous Reporting ◽  
Sarbanes Oxley ◽  
Procedural Safeguards

SUMMARY: The Sarbanes-Oxley Act of 2002 (SOX, Sec. 301) requires audit committees of public companies to establish procedures for employee anonymous reporting of concerns regarding questionable accounting, internal control, or auditing matters. Audit committees have great flexibility in their implementation of this requirement. To address this issue, this paper reports the results of two experimental studies. Our first experimental study examines whether an anonymous hotline possessing stronger procedural safeguards, including external administration and related procedural safeguards, increases fraud-related reporting intentions in comparison with one possessing weaker procedural safeguards, including internal administration. Respondents' intentions to report a fraudulent act were greater under the weaker safeguards condition as compared with the stronger safeguards condition. These results were not anticipated, and an ancillary study was conducted examining internal versus external anonymous hotline administration, holding constant other procedural safeguards. The results show that respondents' intentions to report a fraudulent act were stronger under an internally administered hotline. Thus, our results suggest that an externally administered anonymous hotline may not increase fraud reporting. Our findings have implications for those who oversee and evaluate the operating effectiveness of controls.

scholarly journals The More, The Better? A Case History Of Audit Committee Regulations

2013 ◽  
Vol 9 (2) ◽  
pp. 105-110
Author(s):  
Songtao Mo ◽  
Yifan Shi ◽  
Yajing Wang
Keyword(s):  
Corporate Governance ◽  
Critical Thinking ◽  
Case History ◽  
Audit Committee ◽  
Learning Experience ◽  
Audit Committees ◽  
Regulatory Environment ◽  
Regulatory Changes ◽  
Sarbanes Oxley ◽  
History Of

An understanding of changing auditing regulatory environment is vital in preparing students for the challenges in the accounting profession. The revised requirements for audit committees are one of the significant changes after the Sarbanes-Oxley Act of 2002. Presenting a case history of regulatory changes for audit committees, this study requires students to critically analyze information and to conduct research on auditing topics. Meanwhile, integrating further discussion on corporate governance into auditing class can enrich students learning experience by stimulating critical thinking.

The Effect of Evidence Strength and Internal Rewards on Intentions to Report Fraud in the Dodd-Frank Regulatory Environment

2013 ◽  
Vol 32 (3) ◽  
pp. 87-104 ◽  
Author(s):  
Alisa G. Brink ◽  
D. Jordan Lowe ◽  
Lisa M. Victoravich
Keyword(s):  
Securities And Exchange Commission ◽  
Data Availability ◽  
Audit Committees ◽  
Monetary Incentives ◽  
Sarbanes Oxley ◽  
Evidence Strength ◽  
Internal Whistleblowing ◽  
The Impact ◽  
Internal Incentive ◽  
Reporting Intentions

SUMMARY: There are many unanswered questions and concerns regarding the consequences of the fraud whistleblowing environment created by the Sarbanes-Oxley (SOX) and Dodd-Frank Acts. While SOX requires audit committees to implement anonymous internal reporting channels, the Dodd-Frank Act offers substantial monetary incentives that encourage reporting to the Securities and Exchange Commission (SEC). To mitigate concerns that employees might bypass internal channels, some companies are considering offering internal whistleblowing incentives. However, it is unclear how internal incentives will affect employee whistleblowing behavior. We experimentally examine the impact of an internal incentive on employees' intentions to report fraud. Across treatments, we find a greater likelihood of reporting internally than to the SEC. Evidence strength interacts with the presence of an internal incentive such that SEC reporting intentions are greatest when evidence is strong and an internal incentive is present. When evidence is weak, the presence of an internal incentive decreases SEC reporting intentions. Data Availability: Data used in this study are available from the authors upon request.

The Public Company Whistleblowing Environment: Perceptions of a Wrongful Act and Monetary Attitude

2017 ◽  
Vol 17 (1) ◽  
pp. 1-30 ◽  
Author(s):  
Alisa G. Brink ◽  
D. Jordan Lowe ◽  
Lisa M. Victoravich
Keyword(s):  
Financial Reporting ◽  
Insider Trading ◽  
Data Availability ◽  
Monetary Incentives ◽  
Fraudulent Financial Reporting ◽  
Public Companies ◽  
Securities Law ◽  
Anonymous Reporting ◽  
Sarbanes Oxley ◽  
External Reporting

ABSTRACT The passage of the Sarbanes-Oxley (SOX) and Dodd-Frank Acts created a unique environment for whistleblowing at public companies. SOX requires public companies to establish anonymous reporting channels, and Dodd-Frank outlines substantial monetary incentives for reporting securities law violations directly to the SEC. In response to these provisions, this study examines whether the type of securities law violation (fraudulent financial reporting versus insider trading), individuals' psychological assessments of the wrongdoing, and individuals' monetary attitude influence intentions to report to an internal hotline and to the SEC. We find internal reporting is driven by increased perceptions of responsibility to report a wrongful act, whereas external reporting to the SEC is driven by increased perceptions of seriousness regarding the wrongful act. Finally, we find that individuals' attitude toward money explains reporting intentions; however, we do not find any evidence that monetary attitude leads to increased reporting to the SEC. Data Availability: Data used in this study are available from the authors upon request.

scholarly journals The Effects of Manager-Auditor Affiliation and PCAOB Inspection Reports on Audit Committee Members' Auditor Selection

2016 ◽  
Vol 11 (1) ◽  
pp. P1-P10 ◽  
Author(s):  
Veena L. Brown
Keyword(s):  
Audit Committee ◽  
Auditor Independence ◽  
Audit Committees ◽  
Public Companies ◽  
Sarbanes Oxley ◽  
Management Measures ◽  
Selection Decisions ◽  
Public Company ◽  
Selection Decision ◽  
Auditor Selection

SUMMARY This article summarizes the “The Effects of Prior Manager-Auditor Affiliation and PCAOB Inspection Reports on Audit Committee Members' Auditor Recommendations” (Abbott, Brown, and Higgs 2016), who investigate the extent to which audit committee members (ACM) of small public companies consider auditors' Public Company Accounting Oversight Board (PCAOB) inspection reports and/or the auditors' prior affiliation with management in their auditor hiring decisions. The authors find participants (the study's proxy for ACM) incorporate the inspection report, as well as the auditor's prior affiliation with management into their selection decision. Specifically, an auditor's prior affiliation with management negatively impacts his/her chances of being selected by the audit committee. To the extent inspection results measure auditors' competence and prior affiliation with management measures auditor independence, the authors find auditor independence influences auditor selection decisions only when an auditor is deemed competent. In this paper, I discuss the implications of Abbott et al.'s (2016) findings for auditors, public companies, audit committees, and regulators/policymakers interested in understanding whether and how major aspects of the Sarbanes-Oxley Act of 2002 are being implemented within corporate governance.

Trying to Professionalize Expert Knowledge (Part I): The Short Life of the Municipal Administration Service, 1926-1933

Public Voices ◽  
2017 ◽  
Vol 15 (1) ◽  
pp. 9 ◽  
Author(s):  
Mordecai Lee
Keyword(s):  
Best Practices ◽  
Public Administration ◽  
Expert Knowledge ◽  
Building Blocks ◽  
Early History ◽  
Short Life ◽  
Organizational History ◽  
Municipal Administration ◽  
History Of ◽  
Wide Dissemination

One of the building blocks of the professionalization of American public administration was the recognition of the need for expert knowledge and the wide dissemination of that information to practitioners. Municipal civil servants could adopt and adapt these best practices in their localities. Such was the purpose of the Municipal Administration Service (1926-1933), initially founded by the National Municipal League and funded by the Rockefeller philanthropies. This article is an organizational history of the Service. It presents the life cycle of the agency, including its operations, funding, problems, and the behind-the-scenes public administration politics which led to its demise. In all, the Municipal Administration Service captures the early history of American public administration, its attempt to demonstrate that it was a full-fledged profession with recognized experts and managerial advice that ultimately proved unable to perpetuate itself.

Did the 1999 NYSE and NASDAQ Listing Standard Changes on Audit Committee Composition Benefit Investors?

2017 ◽  
Vol 92 (6) ◽  
pp. 187-212 ◽  
Author(s):  
Seil Kim ◽  
April Klein
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Research Question ◽  
Reporting Quality ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Difference In Differences ◽  
Listed Firms ◽  
Sarbanes Oxley ◽  
Independent Audit

ABSTRACT In December 1999, the SEC instituted a new listing standard for NYSE and NASDAQ firms. Listed firms were now required to maintain fully independent audit committees with at least three members. In July 2002, the U.S. Congress legislated these standards through the Sarbanes-Oxley Act. Our research question is whether all investors benefited from the 1999 new rule. Using both an event study and a difference-in-differences methodology, we find no evidence of higher market value or better financial reporting quality resulting from this rule.

Strategic Audit Inquiry: The Impact of Timing and the Promotion of Statutory Protections on Client Fraud Disclosures

2020 ◽  
Vol 34 (3) ◽  
pp. 153-167
Author(s):  
John R. Lauck ◽  
Stephen J. Perreault ◽  
Joseph R. Rakestraw ◽  
James S. Wainberg
Keyword(s):  
Best Practices ◽  
Audit Quality ◽  
Self Regulation ◽  
Data Availability ◽  
Audit Committees ◽  
External Auditors ◽  
Extant Literature ◽  
Psychological Theories ◽  
Inquiry Process ◽  
The Impact

SYNOPSIS Auditing standards require external auditors to inquire of client-employees regarding their knowledge of actual or suspected fraud (PCAOB 2010b; AICPA 2016). However, the extant literature provides little guidance on practical methods that auditors can employ to increase the likelihood of fraud disclosure and improve audit quality. Drawing upon best practices in the whistleblowing literature and psychological theories on self-regulation, we experimentally test the efficacy of two practical strategies that auditors can employ during the fraud inquiry process: actively promoting statutory whistleblower protections and strategically timing their fraud inquiries. Our results indicate that auditors are more likely to elicit client-employee fraud disclosures by actively promoting statutory whistleblower protections and strategically timing the fraud inquiry to take place in the afternoon, when client-employee self-regulation is more likely to be depleted. These two audit inquiry strategies should be of considerable interest to audit practitioners, audit committees, and those concerned with improving audit quality. Data Availability: From the authors by request.

Searching for Justice After the Holocaust

2019 ◽  
Author(s):  
Michael J. Bazyler ◽  
Kathryn Lee Boyd ◽  
Kristen L. Nelson ◽  
Rajika L. Shah
Keyword(s):  
Best Practices ◽  
Legal History ◽  
Holocaust Survivors ◽  
European Parliament ◽  
Slave Labor ◽  
Insurance Policies ◽  
The Holocaust ◽  
History Of ◽  
Nazi Era ◽  
Property Restitution

The Nazis and their cohorts stole mercilessly from the Jews of Europe. In the aftermath of the Holocaust, returning survivors had to navigate unclear and hostile legal paths to recover their stolen property from governments and neighbors who often had been complicit in their persecution and theft. While the return of Nazi-looted art and recent legal settlements involving dormant Swiss bank accounts, unpaid insurance policies and use of slave labor by German companies have been well-publicized, efforts by Holocaust survivors and heirs over the last 70 years to recover stolen land and buildings were forgotten. In 2009, 47 countries convened in Prague to deal with the lingering problem of restitution of prewar private, communal, and heirless property stolen during the Holocaust. The outcome was the Terezin Declaration on Holocaust Era Assets and Related Issues, aiming to “rectify the consequences” of the wrongful Nazi-era immovable property seizures. This book sets forth the legal history of Holocaust immovable property restitution in each of the Terezin Declaration signatory states. It also analyzes how each of the 47 countries has fulfilled the standards of the Guidelines and Best Practices of the Terezin Declaration. These standards were issued in 2010 in conjunction with the establishment of the European Shoah Legacy Institute (ESLI), a state-sponsored NGO created to monitor compliance. The book is based on the Holocaust (Shoah) Immovable Property Restitution Study commissioned by ESLI, written by the authors and issued in Brussels in 2017 before the European Parliament.

The Trouble with Foreign Investor Protection

2020 ◽  
Author(s):  
Gus Van Harten
Keyword(s):  
International Law ◽  
Dispute Settlement ◽  
Foreign Investor ◽  
Foreign Investors ◽  
Global Context ◽  
Cross Border ◽  
Massive Growth ◽  
Main Effect ◽  
History Of ◽  
Legal Foundations

Governments are rightly discussing reform of investment treaties, and of the powerful system of ‘investor–state dispute settlement’ (ISDS) upon which they rest. It is therefore important to be clear about the crux of the problem. ISDS treaties are flawed fundamentally because they firmly institute wealth-based inequality under international law. That is, they use cross-border ownership of assets, mostly by multinationals and billionaires, as the gateway to extraordinary protections, while denying equivalent safeguards to those who lack the wealth required to qualify as foreign investors. The treaties thus have the main effect of safeguarding an awe-inspiring set of rights and privileges for the ultra-wealthy at the expense of countries and their populations. This book shows how ISDS came to explode in a global context of extreme concentration of wealth and of widespread poverty. The history of early ISDS treaties is highlighted to show their ties to decolonization and, sometimes, extreme violence and authoritarianism. Focusing on early ISDS lawsuits and rulings reveals how a small group of lawyers and arbitrators worked to create the legal foundations for massive growth of ISDS since 2000. ISDS-based protections are examined in detail to demonstrate how they give exceptional advantages to the wealthy. Examples are offered of how the protections have been used to reconfigure state decision making and shift sovereign minds in favour of foreign investors. Finally, the ongoing efforts of governments to reform ISDS are surveyed, with a call to go further or, even better, to withdraw from the treaties.

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