Audit firm policies designed to protect whistleblowers against retaliation for reporting wrongdoing could backfire and make potential tipsters even more fearful of the possible consequences, according to a new academic study.

The study, which appears in the spring issue of the American Accounting Association journal Behavioral Research in Accounting, suggests explicit assurances that whistleblowing will not lead to retaliation could have an unintended effect. Although the experiment deals with a hypothetical auditing firm, it could have implications for other types of organizations.

The study, by James Wainberg of Florida Atlantic University and Stephen Perreault of Providence College, found “the inclusion of explicit protections from specific forms of retaliation can lead to an increase in the salience of such threats, thereby significantly lowering the likelihood that the misconduct will be reported through whistleblower hotlines. Indeed, rather than diminishing the fear of retaliation... perceptions of reporting risk [are] intensified.”

The Association of Certified Fraud Examiners recommends companies specifically stress anti-retaliation protections in communicating with employees, and the vast majority of Fortune 500 companies now do so. However, the new research suggests those policies may be counterproductive.

"It is common knowledge that whistleblowers are often harmed, rather than protected, as a result of reporting unethical behavior,” said the study. “Therefore, vivid language that points a reader's attention to explicit instances of retaliation is likely to evoke fearful mental imagery, even if the intent of the vivid language is to engender a feeling of protection."

The experiment's results suggest that explicitly raising the specter of retaliation, even to convey assurance it will not happen, increases perceptions of risk on average by about 25 percent over what it would be otherwise.

Participants in the experiment were 68 students enrolled in a university graduate auditing course who averaged about one year's experience as auditors. They read a vignette explaining that during the course of performing audit test work, an accountant uncovered evidence that the engagement partner supervising the project had acted in ways that constituted a clear violation of professional independence and conduct requirements. How likely was it, participants were asked—ranging from 1 (extremely unlikely) to 9 (extremely likely)—that the auditor would report the misconduct through the whistleblower hotline established by the accounting firm, and did they agree—on a scale of 1 (strongly disagree) to 9 (strongly agree)—that doing so would harm the staff auditor's chances of being promoted.

In half the cases, they were told the whistleblower hotline was "a method for reporting conduct that may be unethical, illegal, or improper. All responses are kept anonymous."

In the other cases, the same statement was supplemented by the following text likely to resemble what would be encountered in corporate settings: "Individuals who make such a report shall not be subject to intimidation or retaliation. This includes threatening behavior, harassment, loss of job or promotion, or any other professional, personal, or financial form of retaliation both now and in the future. If you believe that you are being retaliated against, you should report such conduct immediately to your direct supervisor or to the Human Resources Department."

Among the group that was assured retaliation would not happen the mean estimate of reporting likelihood was 5.09 on a scale of 1 (extremely unlikely) to 9 (extremely likely), while among the group for which retaliation was unmentioned it was 5.97, or about 17 percent more. Among the first group the mean estimate of job risk was 4.97, while among the second it was 6.18, or almost 25 percent more.

The researchers investigated whether the extent of job security influenced the likelihood of reporting and the perceived risk of doing so and found no statistically significant effects, although they conceded that “as relatively new auditors our participants may have had difficulty relating to the job security construct.”

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