Whistleblowing: The Factors that Contribute to Management Accountants Reporting Questionable Dilemma

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Whistleblowing The Factors that Contribute to
Management Accountants Reporting Questionable
Dilemmas

• Dr. Tara Shawver
• Kings College
• tarashawver_at_kings.edu
• Dr. Lynn Clements
• Florida Southern College

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Definition of Whistleblowing

• Whistleblowing is defined as the disclosure by
  organization members (former or current) of
  illegal, immoral, or illegitimate practices under
  the control of their employers, to persons or
  organizations that may be able to effect action
  (Near and Miceli, 1985).

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Research Questions

• What philosophical factors impact the decision
  for management accountants to whistleblow?

• Moral intensity Scale
• Magnitude of Consequences
• Social Consensus
• Probability of
• Temporal Immediacy
• Proximity
• Concentration of Effect

• MES Scale
• Justice
• Utilitarianism
• Deontology
• Egoism
• Relativism

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Research Questions

• What external factors impact the decision for
  accountants to whistleblow?
• Materiality
• Anonymity
• Job satisfaction
• Ethics code enforcement
• Organizational commitment
• Sarbanes-Oxley protections

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Literature Review

• Rest (1986)
• Trevino (1986)
• Jones (1991)
• Beadau (1971)
• Brody (1970 )
• Ladd (1973)
• McDevitt and Van Hise (2002)
• Miceli, Near, and Schwenk (1991)

• Cohen et al. (1998, 1996, 1993)
• Near and Miceli (1995)
• Miceli and Near (1994)
• Keenan (2002)
• Verschoor (2006)
• Shawver and Clements (2006)
• Shawver et al. (2006)

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Methodology

• Eight hundred participants at the Institute of
  Management Accountants (IMA) 2006 annual meeting
  brown bag luncheon were invited to participate in
  this study.
• 105 people agreed to participate in this study
• 16 declined to finish the survey, providing 89
  usable responses.
• This study asks the participants to evaluate
  three increasing materiality scenarios with
  questions to elicit the respondents moral
  evaluation and whistleblowing intentions.

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Survey Cases

• Case 1
• Your boss has asked you to sign and submit a
  company purchase order he has prepared for a
  computerized software program, valued at 29.95
  that he wants to use to address his daughter's
  wedding invitations. Please rate the request of
  your boss by circling one number for each of the
  items below.

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Survey Cases

• Case 2
• Your boss has asked you to sign and submit a
  company purchase order he has prepared for a
  laptop computer and portable printer, valued at
  1900. He wants to give this equipment to his
  son who is entering his first year of college,
  but the purchase order says it is to replace his
  perfectly good equipment. Please rate the
  request of your boss by circling one number for
  each of the items below.

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Survey Cases

• Case 3
• Your boss has asked you to sign off on your
  department's annual performance report. When you
  look at the report the bottom line seems very
  low. You do some investigating and think that
  your boss has figured out a way to embezzle funds
  and transfer these funds to a Swiss Bank account.
  You estimate the amount to be 100,000. Please
  rate the request of your boss by circling one
  number for each of the items below.

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Hypotheses and ResultsMateriality and Reasons
for Unethical Situations

• H1 Accounting professionals are more likely to
  identify actions involving higher materiality
  values to be unethical.
• H2 Accounting professionals will identify
  philosophical factors of justice, deontology,
  utilitarianism, relativism, egoism, and
  compassion as reasons an action is considered to
  be unethical.
• H1 H2 were supported

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More Reasons for Unethical and Whistleblowing
Intentions

• H3 Accounting professionals will identify
  magnitude of consequences, social consensus,
  probability of effect, temporal immediacy,
  concentration of effect and proximity as reasons
  an action is considered to be unethical.
• H4 Accounting professionals will be more likely
  to whistleblow for unethical actions involving
  higher materiality values.
• H3 H4 were supported

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More Reasons to Whistleblow

• H5 Accounting professionals will identify
  philosophical factors of justice, deontology,
  utilitarianism, relativism, egoism, and
  compassion as reasons to whistleblow.
• H6 Accounting professionals will identify
  magnitude of consequences, social consensus,
  probability of effect, temporal immediacy,
  concentration of effect and proximity as reasons
  to whistleblow.
• H5 H6 were supported

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Organizational Commitment and Cash Reward

• H7 Accounting professionals who perceive that
  they are guaranteed anonymity are more likely to
  whistleblow on unethical actions.
• H8 Accounting professionals who are offered a
  cash reward are more likely to whistleblow on
  unethical actions.
• H7 was partially supported but H8 was not
  supported

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Perceived Corporate Ethical Values of the
Employer and Employee Organizational Commitment

• H9 Accounting professionals working for a firm
  with perceived corporate ethical values are more
  likely to whistleblow on unethical actions.
• H10 Accounting professionals with high
  organizational commitment will be more likely to
  whistleblow on unethical actions.
• H9 was partially supported, but H10 was not
  supported

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Job Satisfaction and Ethics Code

• H11 Accounting professionals with high job
  satisfaction are more likely to whistleblow on
  unethical actions.
• H12 Accounting professionals perceiving that the
  ethics code at their organization will be
  enforced will be more likely to whistleblow on
  unethical actions.
• H11 was not supported but H12 was partially
  supported

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Job Guarantee and SOX Protections

• H13 Accounting professionals who perceive that
  they are guaranteed their jobs are more likely to
  whistleblow on unethical actions.
• H14 Accounting professionals perceiving adequate
  protections under Sarbanes Oxley are more likely
  to whistleblow on unethical actions.
• H13 was partially supported, but H14 was not
  supported

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Summary of Findings

• Although philosophical beliefs and values are
  important for evaluating the reasons actions are
  either ethical or unethical, we find that the
  criteria for evaluating whether or not one would
  whistleblow often extend beyond ones
  philosophical belief systems.
• Accounting professionals are more likely to
  whistleblow for situations involving higher
  materiality levels.
• Accounting professionals are more likely to
  whistleblow if they are guaranteed their jobs.
• As the materiality of the situation increases,
  guaranteeing ones anonymity became the most
  significant factor in the decision for practicing
  accountants to blow the whistle.
• Offering a cash reward, job satisfaction,
  organizational commitment and perceptions about
  protections guaranteed by Sarbanes Oxley are not
  significant factors in the intention to
  whistleblow.

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Implications for our Profession

• Additional research is needed to confirm the
  attitudes of the sample of management accountants
  used in this study with larger samples
• Support from companies and professional
  organizations are critical to encourage employees
  to report unethical or illegal practices
• The authors gratefully acknowledge the IMAs
  research support