When Accountants Blow the Whistle

By Marshall, David J.; Filoromo, Michael A. | The CPA Journal, May 2010 | Go to article overview

When Accountants Blow the Whistle


Marshall, David J., Filoromo, Michael A., The CPA Journal


A Brief Overview of Federal and State Protections

Over the course of their careers, a sizable percentage of accountants and other finance professionals will experience one or more instances in which their employers ask them to do something that might raise ethical or legal concerns.

These situations, which often come up unexpectedly, are as varied as the businesses in which they arise. For example, the CFO of a finance company might instruct an employee to lower an estimate of loan losses because the current figure could scare off a prospective buyer. While interfacing with external auditors, the CEO might question whether it is necessary to disclose to the auditors what is known about the rapidly declining value of an investment. Or, a sales department head might insist on using some of next quarter's sales - backed up only by letters of intent - to boost this quarter's lagging sales figures. Employees who refuse to engage in such behavior may be told they are not team players and could face repercussions from management.

In such a situation, there are essentially three courses of action; employees can: 1) give in and do what their employer or their employer's client wants them to do; 2) resign from the company; or 3) insist on doing the right thing - comply with accounting rules, refuse to engage in fraud or inaccurate reporting of data, and report the problem up the chain of command until someone listens.

Each case is unique, with differing regulations that advise employees how to act The laws or regulations applicable to a company may require an employee to report such concerns or findings up the chain of command, or the employee may feel the need to speak up as a matter of professional responsibility. As lawyers who have represented finance professionals in the very situations described above (and many others like them), the authors can affirm that those choosing the third option of "blowing the whistle" on accounting fraud can launch employees on a rough but rapid road down the corporate ladder and out the door. This possibility is widely known and contributes to the reluctance among most employees to oppose accounting fraud or other such unlawful activity.

What is less commonly known is that federal and state laws provide strong protections for employees in many such instances, and that accountants and other finance professionals can use these laws to achieve favorable outcomes when they fall victim to an employer's retaliation. The purpose of this article is to give accountants some of the information they need to know before blowing the whistle on financial wrongdoing.

Laws Protecting Whistieblowere

Most accountants are familiar with the Sarbanes-Oxley Act of 2002 (SOX), which Congress passed in the wake of the accounting scandals at Enron and WorldCom. SOX requires publicly traded companies to make certifications about their financial conditions and imposes stiff penalties on companies for misrepresenting their finances to shareholders. SOX also contains protections for accountants and other finance employees who face retaliation for providing information about, or participating in investigations relating to, what they reasonably believe to be violations of securities laws on the part of their publicly traded employers.

But SOX is not the only federal law that protects accountants who blow the whistle on financial wrongdoing. Some federal laws protect finance professionals in specific industries. Under the Federal Credit Union Act, for example, a federally insured credit union cannot fire an employee for reporting a possible violation of any law or regulation internally or externally, and any employee so terminated can sue to recover back pay and additional damages. Other laws focus on certain types of transactions. The False Claims Act, which broadly prohibits fraud on the federal government by its contractors, makes it unlawful for a contractor to retaliate against an employee for complaining about such fraud.

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

When Accountants Blow the Whistle
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.