Question 1
Introduction
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
Whistleblowers were never treated with hospitality. In general, 90% of whistleblowers lost their jobs or were demoted, regardless of the industry; 27% faced lawsuits; 26% had psychiatric or medical referrals; 17% lost their homes, and 8% went bankrupt (Waters 2008). As highly righteous as whistleblowers are, they also suffer severe consequences. In Hughes Aircraft case, the company's employees who decided to blow the whistle, Goodearl and Aldred were extremely affected and treated unfairly, so much so that " [Goodearl] and her husband had to file for bankruptcy, and Aldred was on welfare for a year before she could find another job."(The Hughes Whistleblowing Case , n.d.). Hence, the main focus of this paper is to determine
Whistle-blowing is a person who exposes any kind of information or activity that is deemed illegal, unethical or not correct either private or public within an organization or company. When an individual discovers evidence of malpractice or misconduct in an organization he/ she faces an ethical dilemma in which a decision has to be made. Either present documentation or turn the blind eye and not acknowledge the situation. Such information can be classified as a violation of company policy, rules, and regulations or a threat to public interest, national security, as well as fraud and corruption. Those that choose to become whistle-blowers can disclose their information either internal or external.
Review “Just pucker and blow: An analysis of corporate whistleblowers” in Chapter 2. Please respond to the following:
In an age when accelerated communications contribute to growing perceptions of organizational improprieties, the ethical and legal implications of whistleblowing have become a major topic of discussion. According to Lawrence and Weber (2014), whistleblowing is an employee disclosing apparent organizational misconduct to the government or media; however, this reporting of information should come after attempts at going through proper channels in order to persuade the organization to take appropriate actions has been ineffective.
An auditor’s role in an audit is very important. An auditor must be able to collect enough evidence to supports their finding, and also be on the lookout for fraud. Company’s may or may not know the law, but it is the job to know the law, and be able to educate and report findings properly. Since the Sarbanes-Oxley Act, there have been provisions that have directly affected auditors. This paper will include the details of the Sarbanes-Oxley Act, how ethics and independence have affected auditors, as well implementation of new standards based on the Sarbanes-Oxley Act.
Over the past decade the world has been taken by surprise by the numerous accounting scandals that have occurred, for example, Enron, WorldCom, Tyco, Xerox, and Global Crossing (Suyanto, 2009, p. 118). Since those accounting scandals occurred the United States Congress passed the Sarbanes-Oxley Act of 2002 (SOX) to help improve a company’s corporate governance and help deter fraud (Chinniah, 2015, p.2). In addition to SOX, the Accounting Institute of Certified Public Accountants (AICPA) passed the Statement on Auditing Standards (SAS) No. 99 (p. 118). Both of these new accounting laws help to deter financial statement fraud from occurring.
The Dodd-Frank Act has allowed for more leniency when it comes to whistleblowing but this legislation was implemented after this story began. There are several industry protection programs for whistleblowers and the Security and Exchange Commission (SEC) even promotes whistleblowing by giving out monetary rewards for certain cases. The Sarbanes-Oxley Act (SOX) was supposed to make whistleblowers believe that they would not be retaliated against. However, making the determination of whistleblowing after hearing Tony Menendez’s story will make the weak squeamish and the strong possibly reconsider.
The readers should read this specific study to understand corporate fraud. Corporate fraud occurs more regularly than one may think, therefore, understanding what corporate fraud is and the history surrounding it would allow companies and accounting professionals to understand how to help prevent it from occurring within their workplace. In addition, the research provides vital information and history regarding SOX, PCAOB, and AICPA and the rules and regulations required with financial statement reporting and how to better implement rules and regulations to make the company a safer place of business. The research is also vital to companies and accounting professionals as it explains the type of people that commit financial statement fraud
Whistleblowing in the US has long been a controversial topic for many. Whistleblowers are people who work either as outsiders, like journalists, or insiders who uncover secrets from the inside of a corporation- who expose wrongdoings and secrets in the government or businesses. Being a whistleblower is risky business; reputations are put on the line and they commonly face legal trouble. While in the last century Congress has done more to protect these whistleblowers, many people are still on edge about the practice of whistleblowing and protecting it under laws. A big debate that has come to play is whether whistleblowers should be greater protected, or if they should be prosecuted by the law. Whistleblowing has in many instances been extremely helpful to US citizens, and here’s why it should be fully protected by the government.
The whistleblower was aware that the company was falsifying documents, didn’t meet the requirements to produce drugs according with USA regulations.
Throughout the years, the news covered stories of corporate scandals involving accounting unethical practices. These unethical corporate acts had a tremendous negative impact on these company’s stockholders, investors, employees and the whole U.S. economy. Most of these scandals would have been prevented, if the independent audits of these companies were conducted in an ethical manner. With this in mind, two corporate scandals will be the subjects of further review to understand that an auditor might encounter ethical dilemmas, if independence and objectivity are not part of the audit process.
The twentieth President of the United States once said: “The truth will set you free, but first it will make you miserable” (Quotes, 2008). When there is wrongful doing, illegal activity, or unethical behavior happening within a government industry or business it can be difficult to bring this information out in to the open for the public to know. Whistleblowers have the difficult ethical responsibility, with a lot of scrutiny that happens as well, when telling the truth about their findings about a company that is not doing the right thing. Whistleblowing can create a variety of feelings and ethical perspectives for all that might be involved or even just witness the process unfold and
The whistleblower him or herself must be carefully scrutinized. What are the personal and the professional reputations of the whistleblower? What is the motive driving the whistleblower? Is it to benefit the client or the organization, or is it a need for attention or revenge? Is the whistleblower's cause seen as legitimate and significant by trustworthy colleagues and friends? Is the whistleblower aware of the potential consequences of blowing the whistle and still willing to accept responsibility for actions taken?
To help individuals report, it is suggested the management should start a whistle blowing hotline. Such a hotline can be a critical component of the company’s anti corruption efforts as tips can be a common way of detecting frauds.
What is a whistle blower, what probably comes to mind is a person pulling a device that sounds an alarm altering everyone its break time or time to quit work. Barnett defines Whistleblowers as those individuals who call attention to possible wrongdoing within their organizations, are the subjects of much controversy (1992). No longer are employees standing by and letting companies get away with corporate wrong doing. More morally and ethically minded employees are risking their jobs by speaking out. They are three conditions necessary to effectively manage whistleblowing. First, employees must be informed of the appropriate steps to take in the communicating their ethical concerns internally. Employees should not live in fear of reprisal by speaking out. They need to know they have a safe place they can turn to when they feel something is wrong. Second, employees must believe that their concerns will be taken seriously and will be investigated. An employee needs to believe that they are being taken seriously and not simply brushed aside. Employees will not come forward if they feel they are not going the proper time of day. Third, an employee must feel confident that they not suffer personal reprisals of using internal channels to report perceived wrongdoing. If a worker lives in fear they are going to lose their job, they will not report it through internal channels. A