Featured Research

from universities, journals, and other organizations

Anonymous whistle-blowers less likely to be believed, study shows

Date:
July 12, 2010
Source:
Wiley-Blackwell
Summary:
According to a new study, corporate directors, who are ultimately responsible for internal whistle-blowing systems, often do not take action at all regarding anonymous allegations, even when the allegation involves very serious accounting breaches. However, if an identical non-anonymous allegation surfaces, audit committees often launch into action and the corporate director allocates significant resources to the investigation at hand.

According to a new study, corporate directors, who are ultimately responsible for internal whistle-blowing systems, often do not take action at all regarding anonymous allegations, even when the allegation involves very serious accounting breaches. However, if an identical non-anonymous allegation surfaces, audit committees often launch into action and the corporate director allocates significant resources to the investigation at hand.

The first study to investigate the whistle-blowing issue with practicing audit committee members is now published in the Journal of Management Studies.

Public corporations are required to provide anonymous whistle-blowing channels to their employees. Anonymous reporting channels are intended to protect shareholders from financial fraud by making it more likely that fraud will be reported to the board of directors. The study explores how these whistle-blowing channels allow employees at major U.S. corporations to report fraudulent accounting and auditing matters without fear of retaliation from management, how evidence of fraudulent activity is viewed by the board of directors, and how these situations are handled by the board of directors when they occur.

The study finds that anonymous allegations are treated very differently from non-anonymous allegations, and anonymous allegations are largely ignored, particularly when the allegation threatens a member of leadership's reputation. Over eighty audit committee members from U.S., publicly traded companies participated in the study. They were asked to determine and report on the credibility of whistle-blowing allegations from varied non-anonymous or anonymous sources.

"We found that when an allegation poses a threat to a director's professional reputation, a form of distortion of information occurs. An audit committee has an incentive to not investigate the allegation when it creates a reputation threat, and this causes the committee member to believe the allegation is less credible," said Jake Rose, Ph.D., an Associate Professor at the University of New Hampshire Whittemore School of Business and Economics, and co-author of the study. "Our presumption is that most corporate managers, auditors, and corporate directors are honest and ethical people. However, under certain circumstances, 'good' people can engage in 'bad' behavior."

The study finds an essential failure of U.S. corporations' first line of defense against financial fraud. Rose recommends that, "An independent body outside of the corporation needs to be in charge of investigating whistle-blowing allegations." The authors also point out the potential pitfalls of allowing directors to serve on multiple corporate boards.


Story Source:

The above story is based on materials provided by Wiley-Blackwell. Note: Materials may be edited for content and length.


Journal Reference:

  1. James E. Hunton, Jacob M. Rose. Effects of Anonymous Whistle-Blowing and Perceived Reputation Threats on Investigations of Whistle-Blowing Allegations by Audit Committee Members. Journal of Management Studies, 2010; DOI: 10.1111/j.1467-6486.2010.00934.x

Cite This Page:

Wiley-Blackwell. "Anonymous whistle-blowers less likely to be believed, study shows." ScienceDaily. ScienceDaily, 12 July 2010. <www.sciencedaily.com/releases/2010/07/100712102810.htm>.
Wiley-Blackwell. (2010, July 12). Anonymous whistle-blowers less likely to be believed, study shows. ScienceDaily. Retrieved October 21, 2014 from www.sciencedaily.com/releases/2010/07/100712102810.htm
Wiley-Blackwell. "Anonymous whistle-blowers less likely to be believed, study shows." ScienceDaily. www.sciencedaily.com/releases/2010/07/100712102810.htm (accessed October 21, 2014).

Share This



More Science & Society News

Tuesday, October 21, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

CDC Revamps Ebola Guidelines After Criticism

CDC Revamps Ebola Guidelines After Criticism

Newsy (Oct. 21, 2014) The Centers for Disease Control and Prevention have issued new protocols for healthcare workers interacting with Ebola patients. Video provided by Newsy
Powered by NewsLook.com
'Cadaver Dog' Sniffs out Human Remains

'Cadaver Dog' Sniffs out Human Remains

AP (Oct. 21, 2014) Where's a body buried? Buster's nose can often tell you. He's a cadaver dog, specially trained to find human remains and increasingly being used by law enforcement and accepted in courts. These dogs are helping solve even decades-old mysteries. (Oct. 21) Video provided by AP
Powered by NewsLook.com
Traditional Farming Methods Gaining Ground in Mali

Traditional Farming Methods Gaining Ground in Mali

AFP (Oct. 20, 2014) He is leading a one man agricultural revolution in Mali - Oumar Diatabe uses traditional farming methods to get the most out of his land and is teaching others across the country how to do the same. Duration: 01:44 Video provided by AFP
Powered by NewsLook.com
Your Birth Season Might Determine Your Temperament

Your Birth Season Might Determine Your Temperament

Newsy (Oct. 20, 2014) A new study says the season you're born in can determine your temperament — and one season has a surprising outcome. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins