Whistleblowing in Public Accounting: Influence of Identity Disclosure, Situational Context, and Personal Characteristics

Mary B. Curtis is an Associate Professor at the University of North Texas, and Eileen Z. Taylor is an Assistant Professorat North Carolina State University.

The authors thank the editor and two anonymous reviewers, as well as workshop participants at Baylor University,attendees of the 2008 Ethics Symposium, Mark Beasley, Joe Brazel, Steve Kaplan, and Gregory A. Liyanarachchi forcomments on an earlier version of this paper.

1 Quality threatening behavior (QTB) is the term employed by Bedard et al. (2008) for such acts. Similarly, Coram et al. (2008)describe reduced audit quality (RAQ) behavior as the intentional actions taken by an auditor that compromise the quality ofthe audit by increasing the risks that an inappropriate audit opinion will be formed and that financial statement users will beharmed.

APIVolume Nine

2009

Whistleblowing in Public Accounting:Influence of Identity Disclosure, Situational

Context, and Personal CharacteristicsMary B. Curtis and Eileen Z. Taylor

ABSTRACT: Public accounting firms rely on effective reporting of unethical behavior(whistleblowing) as a form of corporate governance. This study presents results from asurvey of 122 in-charge level auditors, who indicated their likelihood of internal whistle-blowing under three forms of identity disclosure for three independent scenarios. Report-ing likelihood was significantly lower under a disclosed identity format, while there wasno significant difference in likelihood between anonymous and protected identity formats.Contrasts reveal a significantly higher likelihood of reporting audit standards violationsthan a professional code violation. Likelihood was also positively related to measures oftrust that the firm would investigate and act on the reported incident. Personal charac-teristics (i.e., locus of control and ethical style) were significant antecedents to whistle-blowing intentions. Findings should aid public accounting firms and organizational gov-ernance researchers in their understanding of the determinants of auditors’ whistleblowingpropensity.

Keywords: whistleblow; audit hotline; ethical style; identity disclosure.

Data Availability: Data available from the authors upon request.

INTRODUCTIONRecent accounting research has provided interesting, albeit limited, insights into the nature

and frequency of unethical conduct in public accounting (Coram et al. 2008; Coram et al. 2004;Kelley and Margheim 1990). Specifically, these studies describe various types of behaviors,known as quality threatening behaviors (QTB), that reduce the quality of the audit and thereforeincrease the risk of an inappropriate audit opinion (Otley and Pierce 1996).1 Relatively little

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Accounting and the Public Interest Volume 9, 2009

accounting research goes beyond the identification of QTB to investigate methods for detectingor preventing these acts.

A recent trend in public accounting is to rely on the whistleblower hotline as a componentof firm risk management policies (Bedard et al. 2008).2 In this way, firms encourage and dependon their employees to report the unethical acts or QTB they observe.3 However, for these mech-anisms to function as effective controls, observers of QTB must be willing to report their obser-vations. Thus, it is important to firms and our profession to identify factors that affect auditors’willingness to use internal reporting mechanisms to report observed ethical breaches.

When auditors are aware that co-workers have violated ethics or regulatory standards, theymust decide whether and how to report their observation. Whistleblower theory suggests thatthis decision can depend on several factors, including the reporting mechanisms the firm makesavailable, the circumstances surrounding the violation, and the personal characteristics of theindividual decision maker (Bedard et al. 2008; Finn 1995). Limited research is available to indicatehow these factors impact the decisions of potential whistleblowers,4 and very little addressesemployees in professional organizations (Finn 1995; Lampe and Finn 1992).

Using an experimental survey, we present in-charge auditors with three real-life scenariosdescribing different standards violations. Auditors indicate their likelihood of reporting the ob-served acts, given three levels of identity protection in their reporting channel. We then measurethe individual’s trust that the firm will investigate and address the reported incident, as well as thepersonal characteristics of locus of control, ethical style, and demographics. We find that re-porting channel format is a significant determinant of whistleblower intentions. Specifically, whena firm does not prevent disclosure of the reporter’s identity, whistleblowing propensity is signif-icantly lower than when the firm protects the reporter’s identity or allows anonymous reporting.Differences between the observed standards violation contexts also result in varying reportingintentions. Additionally, the auditor’s trust that the firm would investigate and act on the reportis significantly related to reporting intentions. The personal characteristic of locus of control is asignificant antecedent of likelihood to whistleblow. A second personal characteristic, ethical style,is only marginally significant. Finally, we identify interactions with the reporting channel format,such that both trust and locus of control become more important as identity protectiondecreases.

This research contributes to the current literature in several ways. First, little research todate has considered the different options organizations have in protecting the identity of thosewho use their hotlines, and none has considered the possibility of ‘‘protected’’ disclosure—

2 As a part of disciplinary actions, the Securities and Exchange Commission (SEC) required one of the ‘‘Big-4’’ firms to implementa hotline, and the other larger firms are, to varying degrees, following suit. Additionally, in discussions regarding firm qualitycontrol, the Public Company Accounting Oversight Board (PCAOB) is currently exploring the requirement that all public ac-counting firms implement some form of confidential reporting mechanism (PCAOB 2004).

3 We recognize that it is possible for organizations, or those who direct them, to be engaged in unethical or even illegal conduct,and that internal whistleblowing cannot correct this behavior. Thus, the scope of this study is limited to organizations whowant to engage in ethical conduct, and need the assistance of their employees to identify instances when these standardsare violated.

4 While some assert that only anonymous reporting should be called ‘‘whistleblowing,’’ we adopt the more common, broaderconsideration that all reporting of observed ethical breaches outside of the normal reporting channel is whistleblowing. Forexample, Time Magazine’s Persons of the Year in 2002 designated as ‘‘whistleblowers’’ three individuals who employed alter-native reporting channels, although none of their reports were anonymous (Lacayo and Ripley 2003). Indeed, the most com-monly referenced definition of whistleblowing is ‘‘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 1995, 4).



identity known to those who must investigate, but not to the perpetrator (Ayers and Kaplan 2005;Kaplan and Schultz 2007). The finding that identity protection may be as effective as anonymityis extremely important to professional organizations because anonymity can so drastically reducethe information reported over the hotline that investigation of the reported act is impossible.5 Incontrast, offering protection could result in a much richer hotline report and facilitate the inves-tigation of the reported act. Second, our finding that individuals differ in their willingness to reportan observed act depending upon the context (comparison across multiple scenarios) demon-strates the importance of observer perception of moral intensity, which very well may not conformto regulatory standards or theory. Third, prior research has not considered the trust the employeehas in the organization or in the features of the hotline. The confirmation that trust plays animportant role in willingness to report may inform not only future researchers, but also organi-zations wishing to identify means for increasing willingness to report observed ethical breaches.Fourth, an extended understanding of how personal characteristics influence reporting decisionscan inform firm policy, professional standards, and future academic research. While locus ofcontrol has strong support in the literature, the impact of ethical style is unexplored. It is im-portant to place both of these characteristics in the ‘‘professional’’ whistleblowing domain andto identify how they interact with reporting channel features. Just as organizations must under-stand how their decisions regarding reporting channel features influence the likelihood of suc-cessful ethics reporting, they must also be aware of influences that moderate the impact of theirpolicies. Finally, it is important to conduct this research with experienced professionals, whoseresponse to real-life ethical dilemmas may differ from those outside of professional organizationsas well as from student experimental subjects. Recent regulatory actions make this a timelyinvestigation of a population little observed in past ethics research.

LITERATURE REVIEW AND HYPOTHESES DEVELOPMENTWhistleblowing

A review of whistleblowing literature reveals two sets of antecedents related to an individual’sintention or actual decision to whistleblow: contextual factors and individual characteristics. Con-textual factors refer to the observed act, reporting channel features, organizational culture (par-ticularly in responding to prior whistleblowers, as well as to the wrongdoer), and the moralintensity of the wrongful act. Individual characteristics pertain to those of the potential whistle-blower, the wrongdoer, or even the investigator.

Contextual or situational characteristics of interest to this study relate to the organization(e.g., culture, responsiveness), the reporting channel, and the observed or suspected unethicalact (moral intensity). Izraeli and Jaffe (1998) find that social norms influence whistleblowing intent,while Sims and Keenan (1998) find supervisor support and informal policies positively influencewhistleblowing intent. Actual whistleblowing is more likely in organizations perceived to be re-sponsive to complaints (Miceli et al. 2008), as well as those that are less bureaucratic (Miceli etal. 1991). King (1999) proposes that organizational structure influences propensity and type (in-ternal versus external) of whistleblowing. Organizational responses (e.g., expectations of retali-ation) are also a significant factor. Kaplan and Whitecotton (2001) find that personal cost (perhaps

5 According to the KPMG (2007) Ethics and Compliance Report, of the 140 reports in fiscal year 2007, 13 reports (10 percent)could not be investigated because the reporter did not provide enough information and did not respond to requests foradditional information.



in terms of retaliation) negatively influences whistleblowing intent among auditors consideringreporting audit QTB. Finn (1995) presents a model that includes not only organizational responseto reporting, but a feedback loop to educate employees about organizational attitudes towardwhistleblowing. Xu and Ziegenfuss (2008) conduct an experiment using internal auditors thatdemonstrates the effectiveness of rewards (including cash incentives and guaranteed continuedemployment) in increasing whistleblowing intent.

Prior research has demonstrated that characteristics of an observed act influence individ-uals’ judgments about the ethicality of the act. Jones (1991) proposes a construct of moralintensity that includes six components that may influence an individual’s decision to commit anact, and possibly influence an individual’s decision to report an act. McMahon and Harvey (2007)find manipulated moral intensity affects participants’ ethical judgments, but perceived moralintensity does not. Rogers and Smith (2001) find that accounting students are sensitive to ascenario involving accounting fraud, suggesting that proximity and social consensus (both fromJones 1991) are salient features defining the moral intensity of the act. Lampe and Finn’s (1992)five-element ethical decision model for auditors includes both a ‘‘recognize impact’’ step and an‘‘assess other values’’ step. These steps acknowledge that auditors consider the effects of aparticular act on others and on themselves respectively. Coram et al. (2008) find that althoughauditors do not judge QTBs ethically different with respect to social consensus, they do differ-entiate among QTBs on the magnitude of consequences and probability of effect dimensions.

Individual characteristics of interest to this study are personal attributes and beliefs of thewhistleblower. With respect to personal attributes, researchers find relationships between inter-nal whistleblowing (action and/or intent) and locus of control (Chiu 2003; Izraeli and Jaffe 1998),level of moral reasoning (Rogers and Smith 2001; Arnold Sr. and Ponemon 1991), age and gender(Mesmer-Magnus and Viswesvaran 2005), and cultural background (Patel 2003). Overall, individ-uals are more likely to whistleblow when they have an internal locus of control, a higher level ofmoral reasoning, are older, and come from individualistic cultures. Other researchers have ex-plored the relationship between whistleblowing and individual personal beliefs. Kaplan andWhitecotton (2001) find that auditors are more likely to report when perceptions of personalresponsibility are greater. Graham (1986) suggests that an individual’s position in the organizationmight influence his sense of responsibility, leading to a higher likelihood of reporting, while Miceliet al. (1991) find that internal auditors are less likely to report when they do not believe reportingis part of their job description. In a study of actual federal whistleblowers, Miceli and Near (1988)find that professionals are more likely to whistleblow than nonprofessionals, possibly due to theexistence of an external support network and/or their greater opportunities for employment out-side the organization.

The current study contributes by including a new contextual characteristic to the reportingchannel structure, evaluating the effect of identity protection on whistleblowing likelihood. Weexplore a second contextual factor, employee trust that the organization investigates and actsupon reports, which previous whistleblowing research has not considered. Further, we examinetwo personal characteristics that may influence reporting intentions: locus of control and ethicalstyle. Although the influence of locus of control on whistleblowing has been previously investi-gated, we explore its possible interaction effects with reporting channel structure. While priorresearch has evaluated ethical style’s impact on ethical judgment in general, we examine its



FIGURE 1

Whistleblowing Model

Organizational Variables

Personal CharacteristicsHotline Identity Format

Disclosed/Protected/Anonymous

TrustHigh/Low

Li

Dependent Variable

kelihood of Reporting

Locus of ControlInternal/External

Ethical StyleCaring/Judging

Moral IntensityHigh/Low

Situational Variable

influence in a whistleblowing decision.6 Finally, we explore these relationships using two sce-narios varying in moral intensity, and one case included for comparison to prior research. Figure1 depicts our theoretical model.

Organizational Variables

Reports made over hotlines represent the largest single source of fraud detection in the U.S.(Association of Certified Fraud Examiners [ACFE] 2008).7 Unfortunately, characteristics of theorganization itself may be the single greatest deterrent to the reporting of unethical acts. Indeed,a survey by the Ethics Resource Center (ERC 2007) showed that 42 percent of all nonman-agement U.S. workers are wary of stepping forward to report ethics violations. The top tworeasons for not reporting are fear of identity disclosure and a concern that no corrective actionwill be taken (Verschoor 2005). We address these two factors below.

6 Although the decision to whistleblow involves an ethical decision regarding the observed unethical act, it involves many otherevaluations or decisions as well. Thus, although one perceives that an observed act is unethical, he or she may not reportthat observation due to other factors. We explore ethical style within a larger decision process that has been previouslyaddressed.

7 Forty-six percent of all frauds were uncovered by a tip; 31 percent of those tips were made through a hotline or other formalreporting mechanism.



Hotline Reporting Format (Anonymous, Protected, Disclosed)One goal of our research is to assist the public accounting profession in the design of

effective hotlines. Organizations may create reporting systems with a wide range of possiblecommunications features (Kaplan and Schultz 2007). While hotlines have numerous character-istics, the feature of interest in this study is the level of reporter identity protection. In general,the three levels of identity protection an organization might establish for whistleblowers includeanonymous reporting, protection of reporters’ identities from public disclosure, and no protectionfrom identity disclosure. It is likely that whistleblowers will not perceive all reporting channelsequally.

Given the harm (e.g., reputation damage, job loss) that many whistleblowers have endured(Lacayo and Ripley 2003; Mansbach 2007), it is reasonable to assume that most would welcomesome form of identity protection. Indeed, Kaplan and Schultz (2007) found that potential reporterswere less interested in using nonanonymous channels when anonymous channels were available,and Ayers and Kaplan (2005) found that a different set of factors affects reporting intentionswhen the channel is anonymous versus nonanonymous.

However, anonymous reporting can lead to many problems, including deep rooted culturaland fairness aversions from anonymous ‘‘finger pointing’’ to difficulties in investigating reportedincidents when basic facts are excluded from the report to ensure reporter anonymity (Near andMiceli 1995). For example, Elliston (1982) calls for general prohibitions on anonymity in cases ofwhistleblowing based on cultural and group norms such as loyalty. However, he identified twoexceptions: the seriousness of the incident and probability of retaliation. Assuming that protect-ing the identity of the reporter and protection from retaliation will increase the likelihood of re-porting, incidents that are more serious justify higher levels of anonymity in order to encouragereporting. Based on the above discussion, we test the following hypothesis:

H1: Auditors will be more likely to report observed violations when reporting mechanismsprovide for greater degrees of identity protection.

The desire for anonymous whistleblowing is contrasted, however, with concerns by thoseinvolved in the investigation of hotline reports who fear that anonymity requirements can greatlyinhibit their ability to investigate and resolve reported activities. A middle ground may be avail-able, such that the firm provides identity protection to the reporter, freeing the reporter to provideadequate information to the firm to fully investigate the incident. While the Sarbanes-Oxley Act(2002) requires public companies to establish anonymous whistleblower hotlines, voluntaryadopters such as public accounting firms have greater flexibility in the design of their mecha-nisms and related policies.8 Thus, the auditing profession provides a special context in which tostudy this phenomenon.

The close-knit nature of audit teams and the characteristics of standards violations maymake true anonymity impossible in public accounting. From extensive discussions with designersand administrators of public accounting hotlines, we learned that it is often impossible to inves-tigate hotline reports without knowing the identity of the reporter, or eventually coming to knowhis or her identity during the investigation. Thus, whistleblowers must often make the trade-offbetween protecting their identity and freeing the firm to investigate the reported activity. Identity

8 Research supporting the effectiveness of alternative identity reporting channels may inform regulatory agency decisions re-garding required features of hotlines.



protection offers a compromise. In the absence of anonymity, protection from public disclosurecould increase the probability that auditors will report observations of wrongdoing. Additionally,since hotlines are not required for the majority of public accounting firms, anonymity policies arethe firm’s prerogative. To explore whether protection is equivalent to anonymity with respect toreporting intention, we pose the following research question:

RQ1: Is there a difference between anonymity and protection with respect to reportinglikelihood?

TrustThe role of trust in facilitating or derailing intra-organizational interactions is significant. For

example, trust has been found to be essential in such broad areas as knowledge sharing (Lin2006) and the transfer of best practices (Lucas 2005), communication (Giffin 1967), leadership(Atwater 1988), management by objectives (Bazerman 1994), negotiation (Bazerman 1994), gametheory (Milgrom and Roberts 1992), performance appraisal (Cummings 1983), labor-managementrelations (Kruglanski 1970), and implementation of self-managed work teams (Lawler 1992). Inaccounting, trust plays a particularly important role in the interactions between auditor and man-agement (King 2002; Rose 2007). While most of the trust research, particularly in behavioraleconomics, deals with trust between two individuals (Mayer et al. 1995), the trust relevant towhistleblowing is the trust of individuals toward organizations (Hernandez 2008; Zucker 1986).

An interesting aspect of trust is its relationship with perceptions of risk (Niu 2008). Forexample, Luhmann (1979) views trust as the willingness and faith to take actions with certaindegrees of risk, while McAllister (1995) defines trust as confidence, and argues that trust enablespeople to take risks. Lewis and Weigert (1985) assert that trust implies people’s intrinsicallyperceived confidence in other parties in the face of risk. Based on Nui’s (2008) extensive reviewof the literature, it appears that trust is relevant to the discussion of whistleblowing in two ways:first in the belief that potential trustees will not act opportunistically (Cummings and Bromiley1996), and second is the belief in trustees’ goodwill (Ring and Van de Ven 1992). An individualreports an observed unethical behavior with the expectation that the firm will take action to stopor correct the behavior, while living up to its promises of identity protection. Given the very realpossibility of retribution from whistleblowing, an employee’s trust that the firm will act based onhis report may have a significant impact on his willingness to whistleblow. Why risk retributionif the report will go unheeded? If the employee does not believe the firm will take action, it isless likely the individual will subject himself to the myriad risks whistleblowers face. Lampe andFinn’s (1992) five-element model for auditors to use in ethical decision making includes an ele-ment titled ‘‘assess other values.’’ This element recognizes that auditors may consider self-interest (e.g., career advancement) when making an ethical decision, such that self-interest mayprevent them from making the decision they know to be correct.

Many organizational characteristics impact trust, such as organizational structure (King 1999)and guarantees of future cooperation (Kramer and Tyler 1996). The firm can actively manageemployee perception of investigation trust through its actions and communications. For example,the firm may report statistics regarding their hotline and resulting actions (KPMG 2007), theymay allow (informally and unofficially) communications of the impact of whistleblowing on firmactions, or they might report to the whistleblower on the status of their investigation if the re-porting individual provides his or her identification. Miceli and Near (1984, 70) point out that ‘‘theresearch is rather consistent in showing that the most powerful incentive a company can offer



potential whistleblowers is its willingness to correct wrongdoing.’’ No research to date has ex-plicitly tested this proposed determinant of whistleblowing, however. To investigate the role trustplays in the whistleblower decision, we offer the following hypothesis:

H2: Auditors with greater trust that the firm will investigate and act on their report will bemore likely to report.

Situational Variable

Moral IntensityWe adopt an issue-contingency perspective for whistleblowing. Grounded in Jones (1991),

this perspective assumes that individuals more easily identify ethical issues of high moral inten-sity.9 Indeed, prior research has found that moral intensity of an ethical issue influences bothethical judgments and behavioral intentions of auditors (Shafer et al. 1999, 2001; Shafer et al.1996; Douglas et al. 2001).10

Jones (1991) asserts that six factors combine to form moral intensity. Three of these factorsare especially relevant to professionals conducting audits: magnitude of consequences, proba-bility of effect, and proximity. The intensity of these three factors, as well as their interrelation-ships, could influence auditors’ whistleblowing behavior. The first factor, magnitude of conse-quences, ‘‘is defined as the sum of harms (or benefits) done to victims (or beneficiaries) of themoral act in question’’ (Jones 1991, 374). A violation of auditing standards or of the Code ofProfessional Conduct could precipitate an audit failure, which in turn may result in financial lossesto the individual stakeholders affected. Within the auditor’s assessment of the magnitude ofconsequences of a particular audit standards violation, we consider both the amount of thefinancial loss and the number of individuals harmed.

The second factor, probability of effect, concerns both the probability that the event willtake place, and the probability that it will cause the expected harm. By the time a whistlebloweris faced with a decision, the violation usually has already occurred (100 percent probability).However, the probability that it will cause harm is variable. For example, a failure to confirmaccounts receivable does not necessarily result in an audit failure. Auditors likely consider theprobability of effect related to the violation. If the probability of effect is low, the auditor maychoose to forgo reporting. If probability of effect is high, the auditor may choose to lessen theexpected harm by reporting the violation internally. If an auditor reports a violation duringthe audit, firm management could initiate alternative procedures to mitigate the negative effect.

The third factor, proximity, relates to the ‘‘feeling of nearness (social, cultural, psychological,or physical) that the moral agent has for victims (beneficiaries) of the evil (beneficial) act inquestion’’ (Jones 1991, 376). Individuals are likely to report violations that are potentially harmfulto their group members (colleagues, family members), but are less likely to report when they donot personally know any of the potential stakeholders (e.g., investors, creditors, and employees)affected. Social proximity can vary widely in the auditing profession. Auditors sometimes performwork for affiliate offices that are geographically distant, work on isolated tasks within a large

9 Moral intensity can be defined in different ways. In contrast to Jones’ (1991) dimensions described here, Taylor and Curtis(2009) measure moral intensity as a combination of the whistleblower’s perceptions of seriousness of the act and personalresponsibility for reporting it.

10 In this discussion, moral intensity relates to characteristics of the observed violation, rather than to the decision to whistleblow.



audit, or work for many clients at once. Auditors who do not feel close to stakeholders may notbe motivated to report violations that potentially harm those stakeholders.

Coram et al. (2008) evaluated auditors’ perceptions of moral intensity for a set of qualitythreatening behaviors (QTB). They found auditors perceived the seven ethical dilemmas to differsignificantly on two of the three dimensions investigated (magnitude of consequences and prob-ability of effect were significant, social consensus was not). These findings support prior studies(Shafer et al. 1999, 2001; Shafer et al. 1996) in asserting that an auditor’s willingness to engagein QTB is issue-contingent. If auditors consider the moral intensity of an act in deciding whetherto engage in it, it seems logical that auditors will also consider moral intensity in their evaluationof acts engaged in by others. Therefore, we expect auditors to consider the combination ofmoral intensity factors in their decision process regarding reporting intentions. We present thefollowing hypothesis related to moral intensity:

H3: Auditors’ likelihood of whistleblowing relates positively to the moral intensity of the ob-served act.

Personal Characteristics

While other aspects of this study address organizational issues that are perhaps unique toprofessional organizations, it is also possible that individual differences across public accoun-tants influence their willingness to whistleblow. For example, Chiu (2003) finds that locus ofcontrol moderates professionals’ relationships between ethical judgments and whistleblowingsuch that those with an internal locus of control were more likely to take action. Jos et al. (1989)find that ‘‘committed’’ whistleblowers demonstrate a belief in absolute moral values and a com-mitment to the greater good. Taylor and Curtis (2009) find that auditors’ professional identitypositively influences whistleblowing likelihood. Kaplan and Whitecotton (2001) examined audi-tors’ reporting intentions when faced with the knowledge that a colleague is considering em-ployment with a client without complying with ethics standards, but were unable to detect adirect effect of personal characteristics, such as professional commitment, on reporting inten-tions. However, we support the logic of that study and its underlying theory (Graham 1986), andseek to identify personal characteristics that can have a direct effect on auditor whistleblowing.

Locus of ControlAn individual’s locus of control describes how he or she attributes causation for events and

can be either external or internal. According to Rotter (1966), subjects with an ‘‘external’’ locusof control attribute events and results to external factors such as luck. ‘‘Externals’’ may feelpowerless to change outcomes because they perceive that unknown others, rather than them-selves, determine the course of their lives. Individuals with an ‘‘internal’’ locus of control rec-ognize a direct relationship between their actions and outcomes. As such, ‘‘internals’’ are morelikely to take responsibility for their actions, and hence are less prone to attribute outcomes toexternal factors. An individual with an internal locus of control would likely perceive that a givensituation is under their control or that they could influence the actions of others (Chiu 2003).

Just as the organization’s prior actions may influence the perception of whether a hotlinereport would result in the desired outcome, the individual’s personality may also affect his per-ceptions. Therefore, an individual who generally believes that his actions can bring about change(someone with an internal locus of control) should be more likely to whistleblow.



Prior literature consistently finds that locus of control influences behavior. Izraeli and Jaffe(1998) survey accounting students and find that an internal locus of control directly and positivelyinfluences intent to whistleblow. Jones and Kavanagh (1996) demonstrate that an individual’slocus of control has a direct effect on unethical behavioral intentions in the workplace as well,and Dozier and Miceli (1985) find a direct effect of locus of control on whistleblowing intentionsin the workplace. Based on theory and prior literature, we believe auditors will demonstratesimilar tendencies and offer the following hypothesis:

H4: Auditors with an internal locus of control will be more likely to whistleblow than willauditors with an external locus of control.

We include the prior discussion and hypothesis to set the stage for a more in-depth explo-ration of locus of control in whistleblowing. Specifically, we evaluate possible interactions oflocus of control with other primary determinants of whistleblowing. It is suspected that somedeterminants of whistleblowing may be more important for those with an external locus of con-trol. For example, hotline characteristics, the moral intensity of the observed act, and the audi-tor’s trust in the organization may provide a greater influence when locus of control is external.

RQ2: In what ways does an auditor’s locus of control interact with other determinants ofwhistleblowing?

Ethical StyleEthical style describes an individual’s specific approach to evaluating ethical dilemmas.

White (2007) classifies ethical styles as either caring or judging. Those who exhibit an ethic ofcare approach an ethical dilemma with the goal of reducing harm or suffering. They treat eachsituation based on the ‘‘specific individuals involved and the particular circumstances of the case’’(Center for Ethics and Business 2008, emphasis added). A caring approach is by nature subjec-tive and relativistic. A judging style, on the other hand, derives from a focus on rules, objectivity,and consistency (White 2007). Judgers act as though justice is blind, emphasizing fairnessacross individuals and situations.

Since whistleblowers report what they believe to be unethical activities, it is likely that theirown ethical style guides their decision making in this regard. Not surprisingly, cases of actualwhistleblowers, as well as prior research, suggest that individuals with a judging style are morelikely to whistleblow. For example, in a current whistleblower protection case, Halliburton attorneyCarl Jordan referred to Tony Menendez, a plaintiff whistleblower, as a ‘‘lone ranger’’ who ‘‘saweverything in black and white, and he thought he was always right and everyone else was wrong’’(Clanton 2007). Jos et al. (1989) find that committed whistleblowers support the idea of universalmoral rules, going as far as to indicate that those rules should be enforced without exception.11

We employ the construct of ethical style to contrast types of ethical worldviews. We expectindividuals who adopt a judging ethical style to be more likely to report unethical behavior, whilethose with a caring ethical style to be less likely.

H5: Auditors who exhibit a judging ethical style will be more likely to report than will auditorswho exhibit a caring ethical style.

11 Seventy-four percent slightly disagreed with the EPQ relativism scale—they ‘‘rejected the relativistic claims about morals.’’



METHODInstrument Design

We employ a within-subjects scenario-based survey to test our hypotheses, varying report-ing format of the hotline and moral intensity of the scenarios. Independent measured variablesinclude Trust, Locus of Control, and Ethical Style. The dependent measure is Likelihood of Re-porting the observed misbehavior. For each participant, we captured this through three questionsvarying identity conditions (anonymous, protected, and disclosed) of the reporting channel foreach of three scenarios varying in moral intensity. Thus, subjects answered nine likelihood ques-tions—three identity levels for each of three scenarios.

We designed the measure Likelihood of Reporting under the three reporting channel formatsas a within-subjects measure in order to assess the extent to which individuals prefer one re-porting mode to another. Our goal in varying the level of identity disclosure was to determinehow the difference in reporting channel format might influence reporting intentions. Economistsand marketers alike assert that humans assign value to concepts and products on a relativebasis, rather than on an absolute basis (Ariely 2008; Tversky 1977). Research supports the as-sertion that we typically have no internal value meter that tells us how much an individual itemis worth in isolation; rather, we focus on the relative advantage of one item over another (Tverskyand Kahneman 1981; Simonson 1989). Thus, in order to determine the relative advantage of onereporting format over another, it was important to provide the participants with all three optionsand allow them to decide their relative preference among the options. To provide the context forrelative preference decisions, each participant was asked to provide a likelihood of reportingfor each of the three identity levels, ranging in order from disclosure to protection to anonymity.Similarly, in order to determine the relative seriousness of one scenario over another, it wasimportant to provide the participants with all three scenarios and allow them to decide the relativeseriousness of each scenario.12

Case Design

Each vignette addresses a violation of either auditing standards (Cases 1 and 3) or theAmerican Institute of Certified Public Accountants (AICPA) Code of Professional Conduct (Case2). Following the lead of Coram et al. (2008), Cases 1 and 3 were constructed to representvariations of moral intensity by varying the components (magnitude of consequences, probabilityof effect, and proximity) of Jones’ (1991) theory of moral intensity.13 Thus, Case 1 represents lowlevels of Magnitude, Probability, and Proximity, while Case 3 represents high levels of thesecomponents. Case 2, employed in prior research (c.f. Kaplan and Whitecotton 2001), allows usto compare our results to those of other studies. In Cases 1 and 3, the perpetrator has violatedaudit procedures, whereas Case 2 represents a threat to audit independence.14 Appendix Bincludes the wording of each vignette, along with indications of moral intensity levels.

12 This instrument was pilot tested with a separate set of subjects to evaluate clarity of instructions and validity of theorizeddifferences between scenarios, as well as scale measures. The expected relative moral intensity of the cases was confirmedin this way. This group reported over four years of professional experience and almost one year of audit experience. Thispattern was repeated with both graduate and undergraduate student samples.

13 Coram et al. (2008) explored the moral intensity factors of magnitude of consequences, magnitude of effect, and socialconsensus, finding that auditors found QTB to differ across the first two, but not the latter. We include the factors they foundto be significant, and add proximity of effect, as well.

14 Additionally, the placement of this case provides a distracter task to separate the manipulated levels of moral intensity.



Data Collection

SampleOur sample includes 122 in-charge auditors attending an international firm training program.

Participation was anonymous and no personally identifying information was collected. The sam-ple was approximately half men and half women, with an average (s.d.) age of 27 (2.9) and aboutthree (.34) years of professional audit experience. The majority (66 percent) had some ethicstraining in college; almost all (93 percent) had received firm-sponsored ethics training. One-thirdof the participants were licensed CPAs. Finally, consistent with prior research, about 25 percenthad previously experienced or observed a situation similar to any described in the scenarios,although few report taking action.

ProcedureData collection occurred in a single session. As part of the general instructions, participants

were told to assume that they worked for a fictitious firm where they were encouraged to reportobserved ethical violations. Following the general instructions, participants read the three cases,each describing a questionable act by a superior. Two vignettes are intended to represent arange of unethical behavior an organizational member may observe, varying in moral intensity,and one case is included for comparison to prior research. After reading each scenario, partic-ipants provided their responses to the dependent variables (what is the likelihood that you wouldreport this behavior) under the three treatments (anonymous, protected, and disclosed). Re-spondents then completed a questionnaire designed to measure their Locus of Control, EthicalStyle, and Trust. Finally, participants provided demographic information including gender, age,college GPA, ethics courses taken, and certifications held.

Independent VariablesInstruments are presented in Appendix A and descriptive statistics are reported in Table 1.

Following Donnelly et al. (2003), we measure Locus of Control as a continuous variable using ashortened 11-item five-point Likert scale adopted from Spector (1988). Our measure resulted ina Cronbach’s Alpha of 0.675, which is consistent with prior research (Lange and Tiggemann1981).

We use White’s (2007) nine-item instrument to measure Ethical Style. Participants select oneof two answers for each of nine belief statements, which were scored as ‘‘0’’ for a caring answerand ‘‘1’’ for a judging answer. These values are summed, resulting in a measure with a theoreticalrange of 0 to �9. Our measure resulted in a KR20 score for reliability of a binary scale of 0.495.We created two questions to measure Trust that the company would respond to reports madeover the hotline, each measured on a five-point scale. These two items have a Cronbach’s Alphaof 0.501.

Dependent VariablesWe measured auditors’ Likelihood of Reporting at three levels of identity, within subjects:

anonymous, protected, and disclosed (see Appendix A). Respondents indicated on a scale of0–100 how likely they would be to report each observed violation given each level of identityprotection.



TABLE 1

Descriptive Statistics of Dependent and Independent Variables (n � 122)

TheoreticalRange

ActualRange Mean

Std.Deviation

Reporting Disclosed 0–300 0–300 184.49 78.89Likelihood Protected 0–300 40–300 231.80 56.82

Anonymous 0–300 40–300 236.52 56.42

Reporting Case 1 0–300 0–300 235.97 76.60Likelihood Case 2 0–300 0–300 164.88 99.14

Case 3 0–300 30–300 252.88 60.25

Trust in Investigation 2–10 2–8 2.87 0.89Locus of Control 11–55 16–39 26.07 4.66Ethical Style 0–9 1–9 5.31 1.76

Dependent variable: Reporting Likelihood (How likely are you to report this given that your identity is ..., on a scale of0–100 percent?).Across:

Reporting Format (across all cases): Disclosed (Disc), Protected (Prot), Anonymous (Anon).Case (across all reporting formats): Case 1 (crane), Case 2 (job offer), Case 3 (car dealer).

Measured variables:Trust in Investigation: measured using two five-point items. Lower values indicate greater trust.Locus of Control: measured using an 11-item, five-point Likert scale. Lower values indicate an internal locus of control.Ethical Style: measured using a nine-item instrument with binary answers. Higher values indicate a caring style and lowernumbers indicate a judging style.

RESULTSDemographics

Respondents reported an average familiarity level with their firm’s hotline procedures of 2.1(pretty comfortable, I understand it) on a scale of 1 to 5. About one-quarter of participants hadobserved an ethical breach similar to one of those described in our scenarios. They also dem-onstrated an interesting level of skepticism regarding hotline reporting with an average responseto 54.6 (on a scale of 0 to 100) to the question, ‘‘What percentage of reports made over whis-tleblower hotlines are true violations of policy or ethics rather than the result of personal problemsor unhappiness with an individual?’’

Table 1 includes demographic information for the sample. From this table, we note that themajority of participants appear to demonstrate an internal locus of control, with a trend towarda judging ethical style and strong trust that the firm will investigate reports. For descriptivepurposes, we summarized Likelihood of Reporting across cases for each reporting format (toevaluate the effects of differences in reporting format) and then across reporting formats for eachcase (to evaluate the effects of differences in Moral Intensity). A review of these summed likeli-hood scores suggests a lower reporting likelihood when identity is disclosed, than when identityis protected or anonymous, and the lowest likelihood of reporting for Case 2 (client job offer).



Table 2 presents correlations between dependent and independent variables. Note the lackof correlation between independent variables, supporting the notion that these measures rep-resent discrete personal characteristics.15 Additionally, correlations between dependent variables,at the various treatment levels, suggest an inconsistent pattern of association between casesand between reporting identity levels. We will explore this pattern further in our discussion ofinteractions.

To assess the perceptions of the three cases, we asked participants to evaluate the seri-ousness of each ethical infraction. Means responses were: Case 1 � 75.15, Case 2 � 62.2,Case 3 � 91.93. Paired samples t-tests indicate the expected significant difference betweenCases 1 and 3 (t � 6.55, p � 0.00). Recall that Cases 1 and 3 represent designed variations ofmoral intensity caused by violated audit procedures, while Case 2 represents a threat to auditindependence and was included because of its prevalence in prior research. Cases 1 and 3 wereanalyzed together, as presented below, and Case 2 analysis is presented in the subsequentsection. All correlations and analyses reported here hold across the three cases, as well as whenonly Cases 1 and 3 are included, unless specifically stated otherwise.

Tests of Hypotheses for Cases 1 and 3

We tested the hypotheses using a two-factor repeated measures model (see Table 3).16 Therepeated factors are three levels of reporting identity (disclosed, protected, and anonymous) andtwo levels of moral intensity (Cases 1 and 3).

H1 and H2 address the reporting mechanism. H1 predicts that greater protection of identityby the reporting mechanism will increase likelihood of reporting. Repeated measures analysissupports an effect across all three levels of identity. In response to RQ1, pairwise contrastsbetween the three levels were performed. Results reported in Table 4, as well as the meanspresented in Table 1, suggest relatively little difference between anonymous and protected iden-tity, and significantly lower likelihood of reporting when identity is disclosed. These relationshipsare depicted graphically in Figures 2 and 3. Thus, even in the presence of all three optionsregarding identity disclosure, participants saw relatively little difference between protection andanonymity.

H2 predicts that likelihood of reporting is dependent upon auditors’ trust that the firm willinvestigate their reports. As depicted in Table 3, Trust is significant in the repeated measuresanalysis, while correlation analyses presented in Table 2 support the direction of the relationship.

15 Using t-tests, we found no significant differences between men and women on any of the relevant independent or dependentvariables. We found a marginally significant correlation (p � 0.06) between age and ethical style such that older individualsexhibit a more judging ethical style. We found no other significant correlations between age and any of the relevant independentor dependent variables. We also asked participants (post-experiment) whether they had ever witnessed standards violationsat work. Comparisons between those who had witnessed violations and those who had not witnessed violations revealed nosignificant differences on any of the dependent variables. Prior experience does not appear to influence reporting intent inthis study. Additionally, we asked two questions relevant to Code of Conduct and unethical activities: ‘‘How familiar are youwith your firm’s Code of Conduct/Code of Ethics?’’ and ‘‘Does your firm’s Code of Conduct/Code of Ethics require thatyou report incidents of unethical behavior by others?’’ Results suggest the participants were very familiar and that their firmCode of Conduct requires reporting. When added to the analyses, these variables were not significant and did not changethe relationship of other variables.

16 We employ repeated measures, as used in Kaplan and Schultz (2007), to isolate effects. We use the Greenhouse-Geisser testof significance for repeated measures, which provides a conservative estimate by adjusting the degrees of freedom downwardwhen sphericity may be violated.

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TABLE 2

Pearson Correlations between Variables (n � 122)

LikelihoodDiscl.

LikelihoodProt.

LikelihoodAnon.

LikelihoodCase 1

LikelihoodCase 2

LikelihoodCase 3 Trust

Locus ofControl Style

Likely: Disclosed 1.00Likely: Protected .742** 1.00Likely: Anon. .714** .974** 1.00Likelihood: Case 1 .581** .706** .709** 1.00Likelihood: Case 2 .738** .797** .802** .320** 1.00Likelihood: Case 3 .723** .614** .566** .295** .415** 1.00Trust �.292** �.135 �.113 �.135 �.105 �.273** 1.00Locus of Control �.288** �.244* �.182* �.156 �.161 �.308** .147 1.00Style �.122 �.185* �.196* �.120 �.143 �.120 .136 .019 1.00

**, * Significant at p � .01 and p � .05, respectively (two-tailed test).Dependent variable: Reporting Likelihood (How likely are you to report this given that your identity is ..., on a scale of 0–100 percent?)Across:

Reporting Likelihood (across all cases): Disclosed (Disc), Protected (Prot), Anonymous (Anon).Reporting Likelihood (across all reporting formats): Case 1 (crane), Case 2 (job offer), Case 3 (car dealer).

Measured variables:Trust in Investigation: measured using two five-point items. Lower values indicate greater trust.Locus of Control: measured using an 11-item, five-point Likert scale. Lower values indicate an internal locus of control.Ethical Style: measured using a nine-item instrument with binary answers. Higher values indicate a caring style and lower numbers indicate a judging style.



TABLE 3

Repeated Measures Test of Cases 1 and 3Determinants of Intentions to Whistleblow (n � 122)

df Mean Square F Pr � F

Within-Subjects:aReporting Format 1 1838.17 4.20 .019Moral Intensity (Cases) 1 2596.28 2.33 .065

Between-Subjects:Trust 1 8411.99 4.60 .017Locus of Control 1 14668.43 8.015 .003Ethical Style 1 3353.87 1.833 .089

Error 117 3219.79Significant Interactions:b

Rpt Format*Locus of Control 1 2216.73 5.066 0.022Rpt Format*Trust 1 3943.89 8.04 0.004

a Greenhouse-Geisser test of significance for repeated measures.b Reported significance is two-tailed.Dependent variable: Reporting Likelihood (How likely are you to report this given that your identity is ..., on a scale of0–100 percent?).Across:

Reporting Format (across cases varying in moral intensity): Disclosed (Disc), Protected (Prot), Anonymous (Anon).Case (across all reporting formats): Case 1 (crane), Case 3 (car dealer).

Measured variables:Trust in Investigation: measured using two five-point items. Lower values indicate greater trust.Locus of Control: measured using an 11-item, five-point Likert scale. Lower values indicate an internal locus of control.Ethical Style: measured using a nine-item instrument with binary answers. Higher values indicate a caring style and lowernumbers indicate a judging style.

H3 predicts that likelihood of reporting will increase with the moral intensity of the ethicalbreach. Repeated measures analysis supports this hypothesis (see Table 3). Participants weremore likely to report the car dealer (high moral intensity) than they were to report the craneverification (low moral intensity), and this difference increased with greater identity protection.H4 predicts that individuals with an internal locus of control will be more likely to whistleblow.Repeated measures analysis in Table 3 supports this hypothesis. Bivariate correlation analysespresented in Table 2 support the direction of this relationship and indicate that, while Locus ofControl relates to Likelihood of Reporting for all three reporting formats, it is significantly corre-lated to only the high-moral-intensity Case 3. H5 predicts that individuals who exhibit a judgingethical style will be more likely to whistleblow than individuals with a caring ethical style will. Inrepeated measures analysis in Table 3, this variable is only marginally significant. In correlationalanalyses, Ethical Style is significantly related to protected and anonymous reporting formats.Ethical Style is not related to the individual cases.

Test of Hypotheses for Case 2

Means presented in Table 1 and pairwise comparisons presented in Table 5 demonstratethat participants were significantly less likely to report Case 2, the job offer scenario, than they



TABLE 4

Test of RQ1Differences between Reporting Formats

Planned Comparisons(n � 122)

Across Cases

Likelihood (SUM of All Cases)

t-statistic df Pr � t

Disclosed versus Protected 9.198 121 �.0001Disclosed versus Anonymous �7.285 121 �.0001Protected versus Anonymous �.917 121 .3610

Within Cases Means

Likelihood of Reporting By Case andReporting Format


Case 1—CraneDisclosed/Protected 68.23 (83.05) �4.003 244 �.0001Disclosed/Anonymous 68.23 (84.70) 4.474 244 �.0001Protected/Anonymous 83.05 (84.71) .515 244 .607

Case 2—Job OfferDisclosed/Protected 43.47 (60.07) �3.683 242 .0003Disclosed/Anonymous 43.47 (61.34) 3.951 242 .0001Protected/Anonymous 60.07 (61.34) .292 242 .771

Case 3—Car DealerDisclosed/Protected 73.28 (88.92) �4.718 244 �.0001Disclosed/Anonymous 73.28 (90.68) 5.321 244 �.0001Protected/Anonymous 88.92 (90.68) .808 244 .420



were to report either Case 1, the crane verification, or Case 3, the car dealer. This pattern holdsunder all reporting formats. Thus, it appears that auditors are less likely to report violations ofCode of Conduct than they are to report those that violate audit standards. These relationshipsare depicted graphically in Figures 2 and 3.

Untabulated tests for Case 2 result in a lack of significant difference between reportingformats (F � 0.44, p � 0.27), and for Trust (F � 0.49, p � 0.24). Locus of Control was significant(F � 2.66, p � 0.05) and Ethical Style was marginally significant (F � 2.067, p � 0.074).

To evaluate RQ2 and demographic variables, we report the following post-hoc analyses.

Post Hoc Analyses

Repeated measures analysis includes an evaluation of all possible interactions; however,only the significant interactions are reported in Table 3. Addressing RQ2, we find an interaction



FIGURE 2

Likelihood Comparisons Reporting Format within Case

FIGURE 3

Likelihood Comparisons Case within Reporting Format

between Reporting Format and Locus of Control. Correlations reported in Table 2 depict that,while Locus of Control was significantly related to all reporting formats, the correlations increasedas identity protection decreased. This suggests that Locus of Control becomes more influen-tial as the possibility of disclosure of identity to the offending party increases, with those withan external locus of control less likely to report under identity disclosure than under anonymity.

The second significant interaction is between Reporting Format and Trust. Correlations pre-sented in Table 2 depict that trust is significantly related to likelihood of reporting only whenidentity is disclosed. It can be assumed that this is due to the potential cost of identity disclo-sure—with disclosure comes greater cost, and individuals will be more willing to bear the costof disclosure if they have greater confidence that their report will produce the desired result. Inseparate analysis of Case 2, the interaction between Reporting Format and Trust was significant,and that between Reporting Format and Locus of Control was not.

Finally, we re-analyzed the model with the addition of gender and age. Independently, neithercharacteristic was significantly related to likelihood of reporting. However, Gender interacted withboth Case (F � 3.686, p � 0.03) and Reporting Format (F � 4.697, p � 0.02). Females were



TABLE 5

Test of H3: Moral IntensityDifferences between Cases (n � 122)

Between Reporting Formats

Likelihood of Whistleblowing(SUM of All Reporting Formats)


Crane-1 versus Job Offer-2 6.284 243 �.0001Crane-1 versus Car Dealer-3 �1.923 243 .0556Job Offer-2 versus Car Dealer-3 �8.404 243 �.0001

Within Reporting Format Means

Likelihood of Reporting by Case andReporting Format


DisclosedCrane-1/Job Offer-2 68.23 (43.47) 5.641 243 �.0001Crane-1/Car Dealer-3 68.23 (73.28) �1.226 243 .2214Job Offer-2/Car Dealer-3 43.47 (73.28) �6.797 243 �.0001

ProtectedCrane-1/Job Offer-2 83.05 (60.07) 5.995 243 �.0001Crane-1/Car Dealer-3 83.05 (88.92) �2.110 244 .0359Job Offer-2/Car Dealer-3 60.07 (88.92) �8.331 243 �.0001

AnonymousCrane-1/Job Offer-2 84.70 (61.34) 6.091 243 �.0001Crane-1/Car Dealer-3 84.70 (90.68) �2.216 244 .0276Job Offer-2/Car Dealer-3 61.34 (90.68) �8.520 243 �.0001



more willing than were males to report the first case (crane verification at affiliate office) andslightly less willing than were males to report the second (job offer) and third (car dealer) cases.Indeed, females’ likelihood of reporting did not differ significantly between the first and thirdcases, suggesting that the manipulated moral intensity between these cases was less relevantto females than to males. In contrast, females reacted more strongly to differences in reportingformat than did males, with females slightly less willing to report when identity was disclosedand slightly more willing to report when identity was protected and anonymous, as comparedto males.

In summary, due to differences between Case 2 (employed in prior studies and involves aviolation of audit independence) on the one hand and Cases 1 and 3 (vary in manipulated dif-ferences in moral intensity derived by violation of audit standards) on the other, we separatedour presentation of analyses. Reviewing these results as a whole, we find a significant differ-ence between Reporting Format (H1) for cases 1 and 3, but not for Case 2. A significant dif-ference between anonymity and protection, and no significant difference between protection and



anonymous, is consistent across all cases (RQ1). Trust (H2) was significantly correlated to Case3 likelihood and to Cases 1 and 3 in repeated measures analyses. There was also an interactionbetween Reporting Format and Trust. When this is explored through correlation analysis, we findthat Trust is negatively correlated to reporting format such that trust becomes more importantwhen identity protection declines. The manipulated difference in moral intensity across Cases 1and 3 (H3) results in a significant difference in likelihood of reporting, with auditors more willingto report for the case with greater moral intensity. Locus of Control (H4) was significant in allanalyses, and also interacts (RQ2) with Reporting Format, indicating that an internal locus ofcontrol becomes more important as identity protection declines. Finally, Ethical Style (H5) wasonly marginally significant in analysis of Cases 1 and 3, as well as Case 2.

DISCUSSIONWe explore organizational factors and personal characteristics related to the whistleblowing

intentions of public accountants. In repeated measures analysis of three reporting formats (vary-ing in level of identity protection) and three situations (two varying in moral intensity and oneincluded for comparison with prior research), we find Trust, Locus of Control, and, to a lesserextent, Ethical Style to be predictors of whistleblower intentions. Auditors with greater trust thatthe organization will investigate their reports are more willing to report observed ethical breaches.Additionally, those who perceive greater control over events (internals) are more likely to whis-tleblow than those who perceive less personal control (externals). Finally, auditors with judgingethical styles were more likely to report than were those with caring ethical styles.

The manipulated organizational variable, Reporting Format, resulted in significant differencesin willingness to report across identity protection levels. Planned contrasts revealed that, asidentity protection decreased, willingness to report also decreased, with the greatest differencebetween protected and disclosed reporting formats. Research participants read all three report-ing options and identified the impact these varying options might have on their reporting likeli-hood, by varying their likelihood estimates. However, in answer to RQ1, even in the presence ofthis rather blunt manipulation, little difference was observed between anonymous and protectedidentity. This finding suggests that when audit firms are not able to provide anonymous mech-anisms, protection from disclosure may be sufficient to encourage reporting.17

Findings indicate that the situational factor, Moral Intensity, influenced auditors’ reportingintentions. Manipulations of moral intensity among the cases resulted in the expected variationsin willingness to report. These differences were more evident under anonymous and protectedreporting formats for the violations of audit standards (Cases 1 and 3). Additionally, under all re-porting formats, participants were least likely to report the violation of the AICPA Code of Pro-fessional Conduct (Case 2—client’s job offer). We included Case 2 because it has been used inprevious accounting whistleblower studies (Kaplan and Whitecotton 2001; Curtis 2006). Thiscontext is even more important since the passage of the Sarbanes-Oxley Act and its prohibitionson client employment offers. However, qualitative comments suggest that participants observedthis event frequently and appear desensitized to its ethical implications. This result may givethose of us in the profession and academia pause. Does this finding suggest that auditors will

17 In a post hoc survey, graduate auditing students found these three reporting options as significantly different in the protectionthey offer. However, in this study, senior auditors demonstrated that the difference between protection and anonymity was notsignificant in influence over their whistleblowing likelihood.



report only the more unusual activities, while behaviors that are more common may go unre-ported? When considering the possible impact of certain unethical behaviors, surely, all thingsequal, those committed most frequently can have the most widespread, and thus largest, po-tential effect. Yet, one interpretation of our quantitative and qualitative findings is that frequencyleads to nonchalance and perhaps, acceptance.

The variety of cases employed in this study allowed us to demonstrate the importance ofcontext in the study of ethical decision making. The limited prior research involving public ac-counting primarily employed a single case—reporting the outstanding job offer of a colleague(Kaplan and Whitecotton 2001). We demonstrate that auditors may not perceive this event topresent an ethical dilemma. Although the behavior is clearly in violation of audit standards, theparticipants in this study did not perceive it as worthy of reporting as other violations. Thus,future scenario-based research should employ a variety of scenarios in order to address the widerange of individual perceptions regarding unethical behavior in accounting.

We motivated the inclusion of Trust in our study by suggesting that, because whistleblowersface the possibility of retribution, individuals may be more willing to report if they felt their reportswould result in the desired action. Again, why suffer retribution if nothing is to come of the report?Both direct relationships and the interactions support our expectation. Since the risk of retaliationincreases with risk of identity disclosure, it is reasonable that trust in the firm’s willingness toinvestigate takes on increased importance when identity is disclosed. Our results support thiscontention that trust in one’s organization is most important when identity is not protected andin instances with the greatest moral intensity.

Why is Trust an organizational variable? The firm’s actions have significant influence overthe development (or erosion) of trust. News reports regarding whistleblowers invariably includedescriptions of the cost the whistleblowers have paid for stepping forward to report an observedviolation of policy, regulation, or ethics. In many cases, organizations acknowledge that not onlydid they allow retribution to occur, but also that they had not acted on the whistleblowers’reports. Thus, the whistleblowers paid the price of whistleblowing without any observable benefit.Our results support the notion that whistleblowers will be more willing to report if they perceivea greater willingness on the part of the organization to investigate reports, and that this percep-tion of trust becomes more important as identity protection decreases (and, therefore, costincreases).

Significant prior research has suggested that Locus of Control influences whistleblower de-cisions. We posed RQ2 to examine possible interactions between Locus of Control and otherwhistleblowing determinants. While confirming this influence in the professional domain is im-portant, the contribution of this study is the demonstration that Locus of Control interacts withReporting Format (in Cases 1 and 3). Although our results suggest that identity protection pro-duces close to the same reporting likelihood as anonymity, both trust and locus of control maywiden this gap. Thus, in fields or professions employing individuals who tend toward a moreexternal locus of control, reporting format may take on greater importance.

Finally, this study introduces the notion of ethical style and whistleblowing. Following White(2007), we measure auditors’ ethical style on a scale with caring on one end and judging on theother. We find that auditors tend to exhibit a more judging ethical style, and that the extent ofthis style influences their willingness to whistleblow. Those who view their ethical decision makingwith a more ‘‘caring’’ ethical frame appear to be less willing to report on the behaviors of others,while those with a more ‘‘judging’’ frame are more willing to report. Interestingly, correlationanalyses suggest that those whose self-reported ethical style tends more toward judging (and



away from caring) are more likely to report as identity protection increases. As a personal char-acteristic, ethical style is probably not subject to management-induced revision. How then doesthis knowledge inform our profession? One way to address a framing issue is to change theframe. Firms can take an active role in helping individuals frame moral issues. If individuals viewwhistleblowing as protecting their colleagues, rather than hurting one individual, their ethical stylemight influence a different decision. For example, changing the decision from ‘‘Should I reporton my friend?’’ to ‘‘Should I protect the firm and therefore all of my friends who work here?’’may redirect an individual’s caring instincts. Thus, firm training and culture can help their pro-fessionals recognize their membership in the organization as a whole and their responsibility tothe group.

Future Research

A necessary first step to increasing whistleblowing is to identify factors that influence re-porting intentions. Factors beyond those explored here may be relevant to whistleblower be-havior (e.g., cultural characteristics of the firm). The next step is to identify actions firms cantake to reduce impediments to reporting. Future researchers are encouraged to explore ways inwhich firms may alter the design of and policies related to their hotlines. They may also exploreinformal steps firms can take to encourage reporting of observed standards violations. For ex-ample, academicians are in a unique position to evaluate possible training to assist employeesin framing ethical dilemmas differently (as discussed above) and to identify whether interventionsare available to redirect individual locus of control.

A key concern of managers is to encourage whistleblowing for unethical acts that will harmthe firm and its reputation. Reporting of all unethical acts, however slight, can prove costly intwo ways. First, the benefits of reporting may not outweigh the costs of reporting. For example,it may be against corporate policy to use company email accounts for personal correspondence.However, the benefits of investigating and preventing such use do not outweigh the costs ofinvestigating, in most instances. Second, a culture of constant observation might impair morale.If employees believe their coworkers will report them for relatively minor acts, workers maybecome uncomfortable with the extent of monitoring. In order to provide a clear designation ofreportable offenses, we restrict this study to violations of auditing standards and the AICPA Codeof Professional Conduct. However, a valuable direction for future research would be to exploreareas not addressed by these professional standards.

Recent research on knowledge sharing may provide an interesting new consideration ofwhistleblowing. In particular, this research has explored motivators for unhelpful and harmfulknowledge sharing (Cockrell 2008). Our participants appear to be rather skeptical regarding theusefulness of reports made over whistleblower hotlines, which may imply the expectation thathotlines facilitate nonhelpful and harmful knowledge sharing. Given that whistleblowing might beconsidered a type of knowledge sharing, an exploration of that literature may be of interest.

Evidence from studies of actual whistleblowers indicates that the primary motivation for theiractions is the likelihood that by reporting, they can effect a change or prevent the unethical actor violation (Jos et al. 1989; Miceli and Near 1988). Thus, an important factor in encouragingreporting is the employee’s expectation of the organization’s response to reports. While thecurrent study finds that auditors who trust that the organization will take action are more likelyto report, additional research on the role of trust between individuals and their organizations mayshed light on reluctance to whistleblow (Hernandez 2008) and identify ways in which trust can



be increased to encourage stewardship behaviors (Kay and Hagan 2003). Expectations can becreated by informing auditors of the organization’s response to prior whistleblowing reports. Forexample, KPMG discloses summary statistics concerning the number of reports and their dis-position in their Ethics and Compliance report.

The violator’s level in the organization, relative to the auditor, may affect an auditor’s pro-pensity to whistleblow. For example, an auditor may be more or less likely to whistleblow on apeer than on a supervisor. Reporting on a superior is an express action to challenge someonein a position of power. Although an interesting question for future research, we hold this variableconstant, considering only situations in which a superior has committed a violation and thepotential whistleblower is a subordinate.

Limitations and Contribution

Participants, setting, and task can all limit experimental results. In certain studies, individualsmay exhibit self-serving biases in order to avoid appearing unethical. Anonymity should mitigatethis bias. Our use of within-subjects measures also helps to address this issue—since we donot evaluate the absolute willingness to whistleblow, but instead evaluate the differences in thiswillingness under various conditions, the impact of presentation bias should be greatly reducedas compared to a similar study conducted as between-subjects.

Individuals may have had prior experiences with whistleblowing, or with circumstances sim-ilar to those in the scenarios, that influence their answers. Setting limitations could arise if in-dividuals do not focus solely on the task. Laboratory experiments create an artificial setting, thuspotentially compromising results (Pedhazur and Schmelkin 1991). Absent incentives for perform-ance, participants may put forth inadequate effort, skewing results.

Because this study presents participants with hypothetical situations, we cannot measurewhether auditors would actually whistleblow. Prior research has used intention measures to pre-dict behavior. A meta-analysis of studies using the Theory of Planned Behavior and the Theoryof Reasoned Action finds that intention alone explains 19 percent to 38 percent of the variationin actual behavior (Sutton 1998). Although this range appears low, findings are subject to thefollowing limitations: time delay between intent and behavior, and a mismatch of measurement(intent is measured on a scale while behavior is dichotomous). Due to the nature of the currentstudy, while behavioral intention is not a perfect predictor of actual behavior, it provides infor-mation about auditors’ judgments and decisions with respect to various situations.

The reliability scores for our independent measures were not as great as we would like.Threats to reliability serve to reduce the predictive ability of the variable. Locus of Control dem-onstrated a Cronbach’s Alpha of 0.675 and Ethical Style demonstrated a KR20 (similar toCronbach’s Alpha) of 0.495. Although a subset of questions determined through factor analysiswould allow these scores to increase significantly, the theoretical support for the resultingscores would be reduced. Thus, we chose to use the full scales with a sacrifice to reliability.Because reduced reliability serves to reduce the predictive ability of the variable, the significanceof the Locus of Control and Ethical Style variables in our analyses is achieved despite theseissues.

Finally, there are advantages and disadvantages to using a single firm in this type of re-search. With multiple firms, firm differences may add value by allowing researchers to exploresuch differences between firms, but they may also make differences in other variables more



difficult to discern. Additionally, similarities within the one firm may mask differences in a con-struct that does vary between firms. For example, the participants’ perception of Trust is aprojection of their trust in their own organization—uniform perceptions of this construct acrossparticipants would have precluded our ability to find an effect. We chose to employ a singlefirm in our study for several reasons. First, we manipulated the ‘‘firm’’ context rather thaninquiring as to the actual characteristics of the firm for which our participants were employed.Second, because the nature and design of hotlines in public accounting are in flux and differgreatly between firms, we believed it important to employ a homogenous subject pool to pre-clude prior experience with such mechanisms from influencing responses—to the extentpossible.18

There are a number of assumptions embedded in this research. First, like most behavioralresearch, we assume that we can capture these constructs with a short set of experimentalquestions or manipulations. We have attempted to increase the likelihood of experimental ade-quacy through careful design and pilot testing. Still, we recognize that we may have oversim-plified some rather complex constructs. Next, we assume that organizations are basically good,interested in learning of the misbehavior of their employees, and willing to react in the bestinterest of both the organization and the reporter when informed of misbehavior. These are as-sumptions easily accepted by some in our profession and emphatically rejected by others. Wedo not blindly assume that whistleblowing is the proper action for all observers of misbehavior,in all circumstances, at all levels of personal cost. However, research confirms that ‘‘tips’’ arethe most common way in which fraud is identified within an organization (ACFE 2008); thus, webelieve that reporting of observed misbehavior is critical to organizational governance (Bedardet al. 2008).

Finally, this study is positioned within public accounting. Therefore, the behavior of theseauditors may not generalize to all individuals, particularly those in nonprofessional positions orin organizations outside of the professional services culture. For example, identity protectionmay not be as effective an alternative in other settings. However, an investigation of whistle-blowing within the context of public accounting is important, both because of the role thatwhistleblowing can play in firm governance (Jenkins et al. 2008), and because many character-istics of public accounting differ significantly from the typical organization in which whistleblow-ing research is conducted. For example, research suggests that public accountants face signif-icant obedience and conformity pressures (Lord and DeZoort 2001; DeZoort and Lord 1994).The study of whistleblowing determinants may be particularly important in public accounting dueto the recency of hotline availability and flexibility of hotline characteristics. Given the recentincreased focus on audit firm quality control (see for example PCAOB 2004), we believe thatexploration of auditor hotline reporting antecedents is both timely and relevant.

Undeniably, unethical behavior exists within audit firms; the challenge is to identify it whenit occurs and stop it before it causes harm. Given the recent audit failures, the topic of whistle-blowing is highly relevant. Research that explores effective ways to promote ethical behaviorand discourage unethical behavior can benefit not only firms, but also standard setters andsociety at large.

18 Few participants in our study had professional experience outside of their present firm.



APPENDIX ALocus of Control (Donnelly et al. 2003)

1 � Strongly Agree 2 � Agree 3 � Neutral 4 � Disagree 5 � Strongly Disagree

1. A job is what you make of it.2. On most jobs, people can pretty much accomplish whatever they set out to accomplish.3. If you know what you want out of a job, you can find a job that gives that to you.4. If employees are unhappy with a decision made by their boss, they should do some-

thing about it.5. Getting the job you want is mostly a matter of luck.**6. Most people are capable of doing their jobs well if they make an effort.7. Promotions are usually a matter of good fortune.**8. To make a lot of money you have to know the right people.**9. It takes a lot of luck to be an outstanding employee at most jobs.**

10. People who perform their jobs well generally get rewarded for it.11. Most employees have more influence on their supervisors than they think.

** Reverse scored.

Trust in Investigation

To what extent are reports made over the firm’s hotline investigated?a. All reports are investigated.b. Most reports are investigated.c. Some are investigated.d. Very few are investigated.e. None are investigated.

To what extent do you trust that reports made over the firm’s hotline are investigated?a. Completely trust.b. Fairly strong trust.c. Somewhat trust.d. Relatively little trust.e. Do not trust.

Ethical Style (White 2007)*1. Which is worse?

a. Hurting someone’s feelings by telling the truth (C).b. Telling a lie and protecting their feelings (J).

2. Which is the worse mistake?a. To make exceptions too freely (J).b. To apply rules too rigidly (C).

3. Which is it worse to be?a. Unmerciful (C).b. Unfair (J).

4. Which is worse?a. Stealing something valuable from someone for no good reason (J).b. Breaking a promise to a friend for no good reason (C).



5. Which is it better to be?a. Just and fair (J).b. Sympathetic and feeling (C).

6. Which is worse?a. Not helping someone in trouble (C).b. Being unfair to someone by playing favorites (J).

7. In making a decision you rely more on:a. Hard facts (J).b. Personal feelings and intuition (C).

8. Your boss orders you to do something that will hurt someone. If you carry out the order,have you actually DONE anything wrong?a. Yes (C).b. No (J).

9. Which is more important in determining whether an action is right or wrong?a. Whether anyone actually gets hurt (C).b. Whether a rule, law, commandment, or moral principle is broken (J).

* Caring answers are denoted by (C), judging answers by (J).

Dependent Variables

Scale: 0–100, where 0 is ‘‘very unlikely’’ and 100 is ‘‘very likely.’’

1. How likely are you to report the supervisor’s actions if your identity will be disclosed tothe supervisor who asked you to sign off?

2. How likely are you to report the supervisor’s actions if your identity will be protectedfrom the supervisor?

3. How likely are you to report your immediate supervisor’s actions if your report could beanonymous?

APPENDIX BScenarios

All scenarios include a violation of either the AICPA Statement of Auditing Standards or theAICPA Code of Professional Conduct. We manipulated three components of moral intensity—allat either high or low levels (noted within scenarios in italics). The perpetrator in all scenarios isthe auditor’s supervisor.

Case 1—Crane Verification

Assume you are auditing a division of a privately held construction company for an affiliateoffice (low proximity). One of your audit tasks is to verify the existence and condition of a mobilecrane (low magnitude of consequences). When you go to the plant to inspect the crane, theplant manager tells you that it is at a remote location offsite and won’t be back for a week. Thein-charge from the affiliate office instructs you to sign off on the audit workpapers, indicatingthat you inspected the crane, stating that the crane is inspected every year and has always beenpresent and in good condition (low probability of effect). (Note that the violation is the supervisor’srequest, not the auditor’s choice to sign off or not sign off.)



Case 2—Job Offer

You are working in the audit of a local wholesale company. Your supervisor on this engage-ment tells you that he has been offered a position with this client at twice his current salary.Further, he has taken on some of the lower-level tasks normally performed by a staff-level auditor.He has asked you to keep the offer a secret until after the audit.

Case 3—Car Dealer

You are on the audit team engaged by a local car dealer. The client needs audited financialstatements to complete a loan application for a significant line of credit (high magnitude ofconsequences) from a bank who is also a client of your audit firm (high proximity). Your immediatesupervisor shows up in a new car, which you recognize from the client’s inventory. He tells youthat the controller ‘‘made him a good deal.’’ Further, he has discouraged you from performingsignificant audit procedures indicated in the original audit plan, and performed in prior years(high probability of effect).

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Documents

Whistleblowing in Public Accounting: Influence of Identity Disclosure, Situational Context, and Personal Characteristics