Whistle-blowing by external auditors: Seeking legitimacy for the South African Audit Profession?

Abstract

Auditing is often cited as playing an important role in managing agency-related costs and, accordingly, being integral to the sound functioning of capital markets. There may, however, be more to the attest function than simply a technical rational practice. By virtue of relying heavily on claims to technical expertise, professionalism, prudential judgement and public confidence auditing is both a source of legitimacy for organisations while, paradoxically, dependent on claims to legitimacy for its own continued existence. From this perspective, recent regulatory developments purportedly enacted to increase arms length control over the profession may not only be about improving perceived audit quality and practice but also about ensuring continued faith in the well-established 'rituals' of the assurance function. A reporting duty imposed on South African external auditors, akin to whistle-blowing, is used as a case study to explore this perspective. In doing so, this paper contributes to the scant body of interpretive research on auditing simultaneously offering one of the first insights into auditing regulation form an African perspective.

The motivations of external whistleblowers and their impact on the intention to blow the whistle again

“…Whistleblowing is specifically grounded in moral obligation and judgment, conscience or social justice, personal integrity, professional responsibility and ethics, and courage, thus occurring not in a routine and repetitive manner, but rather, in an exceptional manner (Alleyne, Hudaib, & Pike, ; Lindblom, ; O'Sullivan & Ngau, ; Shawver, Clements, & Sennetti, ; Vinten, ; Watts & Buckley, ). Numerous researchers (e.g., Cailleba & Petit, ; Maroun & Atkins, ; Maroun & Solomon, ; Nayır, Rehg, & Asa, ; O'Sullivan & Ngau, ; Shawver & Shawver, ; Watts & Buckley, ) assume, at least implicitly, that whistleblowing is mostly motivated by morality. Morality has been addressed in whistleblowing literature in various ways such as: moral dilemma (Lindblom, ); the dual process of moral intuition or deliberative reasoning in which whistleblowing takes place (Watts & Buckley, ); philosophical aspects of decision‐making (O'Sullivan & Ngau, ); the impact of moral intensity and judgments on whistleblowing intentions (Shawver et al, ); and an accountability perspective (Williams & Adams, ).…”

Independent monitoring and review functions in a financial reporting context

“…They interacted with key users of financial statements and were able to provide insights into the relevance of FRIP reviews as a mechanism of accountability. In this way, carefully selecting interviewees introduces a risk of bias 4 but the approach ensures that only those individuals with first-hand experience are engaged in the study and that the findings are detailed and accurate (as per Cohen et al, 2002;Maroun and Solomon, 2013).…”

“…The final product was a summary table which effectively allocated transcript content (including notes generated during the open coding) under theme headings which showed the application of different isomorphic pressures (adapted fromBroadbent and Unerman, 2011;O'Dwyer et al, 2011;Maroun and Solomon, 2013).…”

The Construction of a Whistle-Blowing Protocol for Audit Organisations: A Four-Stage Participatory Approach

“…In contrast, it may also be argued that audit organisations, without adequate whistle‐blowing mechanisms, risk greater reputational damage to society, the profession and themselves. In a recent study of whistle‐blowing among South African auditors, Maroun and Solomon () argue that ‘perceived gains in transparency and conceptions of a whistle‐blowing duty being in the public interest are important sources of pragmatic and moral legitimacy’ (p. 118).…”