Auditing the Act of Whistle Article Review

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However, if any type of confrontation does not happen after fraud is discovered the individual is more inclined to report the transgression to an internal auditor. A 2 x 2 design was used for the experiment (p. 56).

The participants were divided into two groups. The first group consisted of forty-four students and the second group consisted of fifty-two students. The first group was assigned to a situation where the social confrontation what the present condition and the second group dealt with a scenario pertaining to the social confrontation absent condition. The present or absent social confrontation had to do with whether or not the person would confront the wrong doer before either telling the supervisor or the internal auditor. There were two types of fraudulent acts. One was fraudulent financial reporting and the other was misappropriation of assets. Of the ninety-six participants, eighteen answered incorrectly with left the remaining number of participants at seventy-seven (p. 59-60).

The experiment revealed that people are more inclined to confront the person committing the fraudulent act before talking to their supervisor's supervisor. This may be because they want to give the person a chance to correct the bad behavior before it gets out of hand and causes severe damage. But, the study also revealed that if the person committing the fraud is confronted and the result is unsuccessful that the person doing the confronting would more than likely report the act to the supervisor. This was found to be true for both types of fraudulent acts.

The experiment also suggests that if the confrontation is unsuccessful, there is a strong possibility that the confronter will suffer some type of retaliation if nothing is done. This may be the reason why many people decide not to be whistleblowers because they fear that the confrontation and subsequent reporting could backfire. Many companies have anonymous procedures in place because of this fear of retaliation.

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If employees know that someone is committing a fraudulent act, but they are unsure if there will be any repercussions if they have to report the person because of an unsuccessful confrontation they may not be so inclined to do anything. This is not the response that companies want so procedures need to be put into place to ensure the anonymity of the person doing the reporting.

When a person is confronted regarding a fraudulent act, it is hoped that he will admit the act to the supervisor himself. However, an unsuccessful confrontation could result in others not reporting or confronting because they see that nothing is done. This, according to the authors brings into question whether or not confrontation is the best method to deal with the discovery of a fraudulent act. Confrontation can be uncomfortable for both parties and the outcome isn't always predictable so people generally consider other options of reporting fraudulent behavior as opposed to this method.

This article focuses mainly on confrontation of fraudulent acts with two types of scenarios: fraudulent financial reporting and misappropriation of assets. The authors admit that there are limitations with the study because only M.B.A. students from a major university who were under thirty years of age participated in the experiment. Also, the fraudulent acts were hypothetical so therefore the emotions are different than if the person found himself in an actual situation such as this. But, they do feel that this small sampling of students gave an overall good representation to test their hypothesis. They state that this study can be used as a guide audit committees and senior executives regarding the timely reporting of fraudulent activity. They admit their study has limitations, but still feel that there is some validity to what the research has revealed......

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"Auditing The Act Of Whistle" (2010, November 04) Retrieved June 4, 2026, from
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