Whistle-blowing in Auditing

2008 Words9 Pages
Question 1

At the start of this century, unprecedented collapses of Enron and WorldCom have sparked heated world discussions over corporate whistle-blowing. In light of this, legislations and professional codes of conduct are implemented to provide framework on ethical and financial decision-making particularly for auditors. This essay covers prerequisites for an effective corporate whistle-blower hotline, measures to avoid potential pitfalls, as well as analysis on benefits and drawbacks of having a whistle-blower hotline.

Whistle-blower Hotline
What is it?
By incorporating the concepts of whistle-blower of Alford (2001, p.17) and Bok (1980, p.277) into auditing, whistle-blower hotline is a communication system which
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(Mintz and Morris 2008, p.202) Registered chartered accountants should be reminded of bearing legal responsibility to voluntarily report suspicious misbehaviours.
Prerequisites for Procedures of
Handling Claims for Effective Hotline
In Combined Code on Corporate Governance – July 2003 (The Combined Code) issued by Institute of Chartered Accountants in England & Wales (ICAEW), whistle-blowing procedures are formal steps taken by the Audit Commission when concerns regarding malpractice in the corporation are raised. Audit Commission should review corporate arrangements and carry out investigations, and make recommendations to Board of Directors. Audit Commission should follow chronologically the five steps in handling claims stated below.

I. Submission
Introduce Multiple Easily-accessed Channels of Communication
Corporations usually establish both internally and externally a confidential toll-free telephone hotline, email address and message boxes on official website which allow whistle-blowers staying nameless. (Devine and Maassarani 2011, p.271) The hotline should be easily accessible as stakeholders range from employees, clients, suppliers to members of the public. It should be operated at all times so that whistle-blowers do not face time restriction in reporting suspected wrongdoings. Hence, multiple channels allow whistle-blowers to choose the most

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