Effects of Advice on Auditor Whistleblowing Propensity: Do Advice Source and Advisor Reassurance Matter?
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ORIGINAL PAPER
Effects of Advice on Auditor Whistleblowing Propensity: Do Advice Source and Advisor Reassurance Matter? El’fred Boo1 · Terence Ng2 · Premila Gowri Shankar3 Received: 16 September 2019 / Accepted: 2 September 2020 © Springer Nature B.V. 2020
Abstract We conduct an experiment to investigate the joint effects of advisor reassurance and advice source in enhancing the impact of advice on auditors’ whistleblowing propensity. Participants from a Big 4 firm assess the likelihood that a questionable act involving a superior will be reported, both before and after receiving advice. We manipulate, between-participants, the advice source (the technical department, an authoritative source vs. a colleague, a non-authoritative source) and advisor reassurance (with vs. without) on the firm’s policy on whistleblower protection, holding constant the advice recommendation. Our study is underpinned by the premise that moral agents may require an impetus to do the right thing in the form of advice whose effects may vary by its source and nature. Results are consistent with our hypothesis. Specifically, while auditors’ propensity to report a questionable act increases after receiving advice, the increase is significantly higher when the advice is received with reassurance on whistleblower protection than without reassurance, with the effect of reassurance being greater when the advice is from an authoritative source (the technical department) than from a non-authoritative source (a colleague). These results underscore the importance of advice in promoting whistleblowing and demonstrate how the impact of advice is jointly determined by its source and reassurance on whistleblower protection. Keywords Advice source · Reassurance · Questionable act reporting · Whistleblowing · Fraud detection
Introduction Auditors face challenges assessing the appropriateness of clients’ accounting treatments as business and accounting issues are getting more complex (Chychyla et al. 2019; Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10551-020-04615-0) contains supplementary material, which is available to authorized users. * Terence Ng [email protected] El’fred Boo [email protected] Premila Gowri Shankar [email protected] 1
Nanyang Technological University, S3, 01b‑47, 50 Nanyang Avenue, Singapore 639798, Singapore
2
Nanyang Technological University, S3, B1c‑99, 50 Nanyang Avenue, Singapore 639798, Singapore
3
Nanyang Technological University, S3, B2c‑112, 50 Nanyang Avenue, Singapore 639798, Singapore
Plumlee and Yohn 2010), a problem compounded by both the U.S. GAAP and IFRS allowing considerable reporting discretion (Notbohm et al. 2019). In instances where the client’s inappropriate accounting treatment is condoned by the audit superiors, it would be helpful if the audit staff could seek advice on the appropriateness of the accounting treatment, even if it were merely to confirm what they initially suspect is a clear accounting breach, so as to bolster their conf
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