The effect of evidence strength and internal rewards on intentions to report fraud in the dodd-frank regulatory environment

Alisa G. Brink, David Lowe, Lisa M. Victoravich

Research output: Contribution to journalArticle

26 Scopus citations

Abstract

There are many unanswered questions and concerns regarding the consequences of the fraud whistleblowing environment created by the Sarbanes-Oxley (SOX) and Dodd-Frank Acts. While SOX requires audit committees to implement anonymous internal reporting channels, the Dodd-Frank Act offers substantial monetary incentives that encourage reporting to the Securities and Exchange Commission (SEC). To mitigate concerns that employees might bypass internal channels, some companies are considering offering internal whistleblowing incentives. However, it is unclear how internal incentives will affect employee whistleblowing behavior. We experimentally examine the impact of an internal incentive on employees' intentions to report fraud. Across treatments, we find a greater likelihood of reporting internally than to the SEC. Evidence strength interacts with the presence of an internal incentive such that SEC reporting intentions are greatest when evidence is strong and an internal incentive is present. When evidence is weak, the presence of an internal incentive decreases SEC reporting intentions.

Original languageEnglish (US)
Pages (from-to)87-104
Number of pages18
JournalAuditing
Volume32
Issue number3
DOIs
StatePublished - Aug 1 2013

Keywords

  • Dodd-frank act
  • Fraud
  • Motivational crowding
  • Rewards
  • SEC
  • Sarbanes-oxley act
  • Whistleblowing

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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