Increased Motivation for Whistleblowing

By Verschoor, Curtis C. | Strategic Finance, November 2010 | Go to article overview

Increased Motivation for Whistleblowing


Verschoor, Curtis C., Strategic Finance


New statutory and regulatory changes provide greater rewards to individuals who blow the whistle on fraudulent activities and to organizations that actively encourage an effective ethical culture-important steps at a time when the rate of fraudulent financial activity is likely to increase.

The current economic climate has greatly helped to create and sustain an environment conducive to fraudulent financial reporting. As part of its emphasis on enforcement and investor protection, the Securities & Exchange Commission (SEC) has reported a significant increase in 2010 in both the number and the size of fraud cases. The agency even formed an Investor Advisory Committee in 2009.

[ILLUSTRATION OMITTED]

Now, provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), e.g., Title IX--Investor Protection and Securities Reform Act of 2010, and new incentives contained in amendments to the U.S. Federal Sentencing Guidelines are likely to increase the motivation for whistleblowing activities and subsequent assertions of fraud.

The probability of wrongdoing is likely to increase. According to the 2010 Ethics & Workplace Survey published by Deloitte, one reason is that the economic downturn has diminished two important elements of conducting business: trust and ethics. Nearly a third of employees surveyed said their fellow workers are more likely to behave in an unethical manner in today's environment. The report noted that almost half of employees who planned to search for new employment when the job market recovers stated that one of their reasons for leaving was a loss of trust in their employer because of how decisions were made.

These factors will likely contribute to more instances of fraudulent financial reporting. More than half the respondents to a web cast poll conducted by Deloitte think more financial statement fraud will be uncovered in 2010 and 2011 compared to the past, and 45% believe fraud is getting harder to detect because of changes in the risk environment. Manipulation of revenue recognition was cited as the greatest concern, followed by "big-bath" write offs while earnings expectations are low and manipulation for debt covenant compliance purposes.

As reported regularly in the biannual Report to the Nations on Occupational Fraud and Abuse from the Association of Certified Fraud Examiners (ACFE), the most fruitful source of information leading to discovery of fraudulent activity is whistleblowing tips from employees or outsiders. Having an anonymous method to report wrongdoing has significant benefits, according to the ACFE, including quicker discovery, shorter duration, and smaller losses.

While the term "whistleblowing" can mean different things to different people and in differing environments, Brian Martin, a professor at the University of Wollongong in Australia and author of The Whistleblower's Handbook: How to Be an Effective Resister, has widely publicized a definition of whistleblowing:

"Whistleblowing is an open disclosure about significant wrongdoing made by a concerned citizen totally or predominantly motivated by notions of public interest, who has perceived the wrongdoing in a particular role and initiates the disclosure of her or his own free will, to a person or agency capable of investigating the complaint and facilitating the correction of wrongdoing."

It should be noted that only disclosures of "significant" wrongdoing should be considered whistle-blowing, not legitimate differences of opinion or minor concerns. Also important is that the motivation for disclosure shouldn't be personal but should reflect the interests of a larger public. The language describing the whistleblower as a concerned citizen reflects the fact that issues of whistleblowing in the past were largely limited to the government sector, including lawsuits under the False Claims, or qui tam, statutes.

A more legalistic definition of whistleblowers is contained in Whistleblowing: The Law of Retaliatory Discharge by Daniel Westman and Nancy Modesitt: "Employees who oppose, either internally or externally, their employer's conduct.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Increased Motivation for Whistleblowing
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.