External whistleblowing intentions of auditors: a perspective based on stimulus–organism–response theory

• DOI: https://doi.org/10.1108/CG-03-2021-0116
• Published date: 03 December 2021
• Date: 03 December 2021
• Pages: 871-897
• Subject Matter: Strategy,Corporate governance
• Author: Tuan Mastiniwati Tuan Mansor,Akmalia Mohamad Ariff,Hafiza Aishah Hashim,Abdul Hafaz Ngah

External whistleblowing intentions of

auditors: a perspective based on

stimulus–organism–response theory

Tuan Mastiniwati Tuan Mansor, Akmalia Mohamad Ariff, Hafiza Aishah Hashim and

Abdul Hafaz Ngah

Abstract

Purpose –This study aims to examinethe roles of perceived organisational support (POS), attitudeand

self-efficacy in understanding the external whistleblowingintentions among senior auditors through the

lens of stimulus–organism–response theory.

Design/methodology/approach –This study uses data from 119 senior auditors in audit firms in

Malaysia. POS is predictedto be a stimulus factor from the externalenvironment that affects the attitude

and self-efficacy(organism) of the auditors andreassures them to act to whistleblow (response).

Findings –POS has a significant impact on self-efficacy and on attitude. Self-efficacy is shown as a

significant mediator between POS and external whistleblowing intentions, but there is no statistical

support for self-efficacy having a mediating effect on the relationship between the attitude of senior

auditorsand external whistleblowing intentions.

Practical implications –The findings can assist accounting professional bodies in understanding the

psychological behaviours of auditors that contribute to their intention to shine a light on wrongdoing in

audit firms and in providing a better insight into the critical factors that could influence auditors to

whistleblow.

Originality/value –This study is among the earliest to investigate the application of

stimulus–organism–response theory in whistleblowing, and hence it illustrates how the theory can be

applied in studies on the ethicalbehaviours of actors in professional careers. The findingsshed light on

the roleof self-efficacy as a significant mediatorbetween POS and external whistleblowingintentions.

Keywords Whistleblowing intentions, Senior auditors, Stimulus–organism–response theory, Malaysia

Paper type Research paper

Introduction

Whistleblowing has become an important monitoring mechanism in the wake of a great

number of corporate financial scandals[1]. It is an important issue for regulators around the

world because renowned bodies such as the World Bank, the World Trade Organisation

and the Organisation of Economic Co-operation and Development have placed emphasis

on the act of whistleblowing as a primary mechanism to prevent corruption. By disclosing

information on fraud, corruptionand other forms of wrongdoing, whistleblowers have helped

in saving billions of dollars and preventing scandals and disasters from worsening

(Transparency International, 2018). The 2016/17 Global Fraud and Risk Report states that

whistleblowing is the mechanism that recorded the highest percentage success rate in the

uncovering of fraud, at 44% as compared to internal audit (39%) and management of the

company (25%) (Kroll, 2017). Nevertheless, there are still occasions upon which the act of

whistleblowing is deemed a complex ethical dilemma. From the whistleblowers’

perspective, while the act of whistleblowing reflects their high morale intensity, the risks

Tuan Mastiniwati Tuan Mansor

is based at the Department

of Commerce, Politeknik

Hulu Terengganu, Kuala

Berang, Malaysia.

Akmalia Mohamad Ariff,

Hafiza Aishah Hashim and

Abdul Hafaz Ngah are all

based at the Faculty of

Business, Economics and

Social Development,

Universiti Malaysia

Terengganu,

Kuala Terengganu,

Malaysia.

Received 4 March 2021

Revised 3 August 2021

16 October 2021

21 October 2021

Accepted 2 November 2021

The study is financially

supported by the Fundamental

Research Grant Scheme

(FRGS/1/2016/SS01/UMT/02/5)

from the Ministry of Higher

Education of Malaysia. The

authors thank the Ministry for its

research support.

DOI 10.1108/CG-03-2021-0116 VOL. 22 NO. 4 2022, pp. 871-897, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 871

involved can include threats to personal life, loss of employment and several other forms of

retaliation (Young, 2017). Whistleblowing may not be effective due to the challenges faced

by potential whistleblowers when decidingwhether to come forward and report instances of

unethical behaviour and conduct. Hence, it is essential to explore the whistleblowing

intentions to identify the influencingfactors that are lacking and require attention to promote

whistleblowing and to reap its benefitin combating fraud and corruption.

Whistleblowing has been defined as “the disclosure by organizational members (former or

current) of illegal, immoral, or illegitimate practices under the control of their employers, to

persons or organizations that may be able to effect action” (Near and Miceli, 1985, p. 4).

One potential group of whistleblowers is accounting professionals, who, due to their nature

of work, are deemed to be proficient in discovering irregularities. In the context of Malaysia,

the enactments of legislative provisions [2] such as the Companies Act (2016), Capital

Markets and Services Act (2007), Securities Act (1983) and Malaysian Anti-Corruption

Commission Act (2009) have identified certain individuals that may wish to whistleblow,

including accountants and auditors (May-Amy et al.,2020). More recent reforms in these

provisions are aimed at strengthening ethical conduct, one of which is the Whistleblower

Protection Act (2010) thatspecifically focuses on safeguarding whistleblowers.

Accounting professionals are bound by their professional code of conduct, such as the

Malaysian Institute of Accountants by-laws in Malaysia, and they are expected to comply

with such codes and laws. They are also equipped with the knowledge and experience, as

well as the professional skills for detecting signalsof misconduct. Hence, one would expect

accounting professionals to be among those with the greatest responsibility to whistleblow.

Yet, the increasing number of cases of financial fraud has brought into question the role of

accounting professionals, i.e. external auditors, in protecting the public interest (Tuan

Mansor et al.,2020

). In the context of external auditors, examples such as the demise of

Arthur Andersen due to their involvement in the Enron scandal [3] and the misdeeds of

KPMG South Africa have led to reputational damage and to investigations by the audit

regulator and professional accountingsociety (Holtzblatt et al.,2020). Al-ahdal and Hashim

(2021) assert that there are cases where external auditors are involved in corporate fraud,

when it should be their duty to prevent accounting malpractices. Accordingly, because

fraud and corruption have continued to put the public at risk, the importance of external

auditors in acting and intervening when they become aware of these issues, such as

through whistleblowing, needsto be further explored.

In this study on potential whistleblowers, the focus is directed at senior auditors who play an

important role in the financial audit process. As senior-level professionals, they hold more

responsibility than junior auditors. The senior auditors are responsible for evaluating and

completing audit reports and in doing so they perform a wide range of duties, which

includes dealing with issues that arise during an audit engagement. Therefore, they are in

the best position to witness any wrongdoing that might be performed during the audit

process including those performed by their colleagues. Auditors may face situations where

they have observed various types of wrongdoing [4] in the audit firm such as in the

circumstances when their colleagues work together with clients to deceive the public or

cover up irregularities. Considering the numerous legal obligations upon auditors to

whistleblow externally, it is relevant to investigate whether senior auditors are willing to

whistleblow on the wrongdoing done by their colleagues through the external reporting

channels. It is also important to figure out their intentions because external whistleblowing

may place an additional burden on them.

Evidence on whistleblowing intentions among accounting professionals indicates that

various factors can explain the act of whistleblowing, including individual factors such as

attitude, perceived behavioural control, personal responsibility and the cost of reporting

(Alleyne et al., 2018;Latan et al., 2018), as well as organisational factors such as the

organisational structure of the audit firm (Brennan and Kelly, 2007). Despite these important

PAGE 872 jCORPORATE GOVERNANCE jVOL. 22 NO. 4 2022