Anti-Retaliation Protections Can Hinder Audit Whistleblowing

Apr 1st 2016
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If an audit whistleblower is promised protection against explicit retaliation tactics, will there still be consequences in other ways? Yeah, and it’s a whopper of a catch-22.

A new study, Whistleblowing in Audit Firms: Do Explicit Protections From Retaliation Activate Implicit Threats of Reprisal? published in the spring issue of the American Accounting Association’s Behavioral Research in Accounting, indicates that vows of whistleblower protection may actually make auditors less likely to report wrongdoing.

“A primary reason for this finding is the fact that individuals are fearful that they will suffer workplace retaliation as a consequence of reporting observed misconduct,” the study states. “Indeed, there are numerous well-publicized examples of lives and careers that have been irreparably damaged as a result of whistleblower retaliation.”

Still, hotlines are especially valued in audit firms because auditors are generally viewed as seeing the wrongdoing first, the study states. And that has led to increasing use of hotlines.

Obviously, there’s a disconnect: There’s a growing use of whistleblower hotlines, but employees hesitate to dial in. The problem may lie in the very whistleblower hotline policies themselves, the study states.

The policies often include detailed protections from specific types of retaliation: harassment, job loss, promotion loss, or financial issues. Indeed, the Association of Certified Fraud Examiners recommended in its 2012 report a description of specific protections to professionals.

Thing is, it freaks out would-be whistleblowers who, in this study, are junior auditors. Researchers found that the descriptions of explicit protections in the hotline policies actually increased the perception of whistleblower risk. And, so, they were less likely to report wrongdoing.

Consider the impact of the following two statements presented to the study’s 68 participants:

  • The hotline is “a method for reporting conduct that may be unethical, illegal, or improper. All responses are kept anonymous.”
  • The hotline is “a method for reporting conduct that may be unethical, illegal, or improper. All responses are kept anonymous. Individuals who make such a report shall not be subject to intimidation or retaliation. This includes threatening behavior, harassment, loss of job or promotion, or any other professional, personal, or financial form of retaliation both now and in the future. If you believe that you are being retaliated against, you should report such conduct immediately to your direct supervisor or to the human resources department.”

The finding: When explicit forms of retaliation were described in the second statement, participants indicated a greater job risk.

What to do? The study’s authors – professors James Wainberg of Florida Atlantic University and Stephen Perreault of Providence College – offer the following advice:

  • Minimize the impression of retaliation risk when crafting hotline policies. Rather than describing explicit retaliation protections (such as from job loss), describe the company’s commitment to good corporate governance and ethical behavior.
  • Publicize successful whistleblowing, which helps drive home the anti-retaliation point.
  • Go ahead and indicate that retaliation is forbidden. Just keep in mind that explicit descriptions of the types of retaliation can backfire.