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What accounting students think about whistleblowing: are future accounting professionals willing to whistleblow internally or externally for ethics violations?

Article Excerpt
Cynthia Cooper, Sherron Watkins, and Coleen Rowley are some of the most well-known whistleblowers who have been held in high regard for their efforts to uncover wrongdoing within their organizations. They even appeared on the cover of Time magazine on January 6, 2003, as its "Persons of the Year." These individuals took great personal risks to expose wrongdoing prior to the implementation of the Sarbanes-Oxley Act (SOX), which requires public companies to provide protection to the whistleblower. David Welch was fired for reporting insider trading incidents by management of the Bank of Floyd (a subsidiary of Cardinal Bankshares Corporation) and is the first whistleblower to use the protective provisions of SOX. Under SOX Section 806, any publicly traded company cannot discharge an employee for providing information about corporate wrongdoing. The preliminary findings gave Welch the right to recover his litigation costs and expenses and to be reinstated as CFO. Many others who may consider reporting unethical actions, however, may face a variety of positive or negative consequences as a result of the decision to whistleblow. Because professionals in the workplace face ethical and unethical decisions daily, there is a need to research what factors may cause a person to blow the whistle.

LITERATURE REVIEW

Whistleblowing

Janet P. Near and Marcia P. Miceli define whistleblowing 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." (1) As accountants and auditors, our codes of ethics specify our responsibility to the public over our responsibility to our clients. This can be problematic for those who choose to blow the whistle because a whistleblower can be viewed positively as someone who is trying to help correct problems within an organization or viewed negatively as a person who is trying to cause trouble for an organization. Whistleblowers may face backlash as a result of coming forward even if the action of whistleblowing results in positive corrective action. A 2002 Time/CNN poll reported that 18% of those polled considered whistleblowers traitors, and 59% considered whistleblowers heroes. (2) Whatever the motive, a whistleblower may realize that the consequences of whistleblowing range from personal retaliation such as termination to organizational risks such as continuation of wrongdoing or controversy over policy changes and societal risks such as declining stock prices. Anonymously blowing the whistle may offer some protection to the whistleblower, but the effectiveness of an investigation may be reduced. Therefore, the protections offered under the Sarbanes-Oxley Act may encourage whistleblowing and help with future investigation of the identified wrongdoing. Because research in this area is limited, many people continue to question what factors may contribute to one's willingness to report wrongdoings.

Materiality Levels

Organizational members may react differently in choosing to whistleblow for various types of inappropriate behaviors. Rosalie McDevitt and Joan Van Hise confirm that individuals respond differently to various materiality levels in evaluating ethical dilemmas. (3) This study extends their research using situations they created to evaluate whether the materiality of the situation affects whistleblowing intentions. Therefore, hypothesis H1 is presented below:

* H1--Accounting students are more likely to whistleblow for unethical actions involving higher materiality values.

THE MULTIDIMENSIONAL ETHICS SCALE (MES)

Individuals must consider and balance several philosophical values when facing an ethical decision. This study asks the participants to evaluate the scenarios with questions from the Multidimensional Ethics Scale (MES). The MES, developed by R. Eric Reidenbach and Donald P. Robin, elicits a moral evaluation within the...