Accounting fraud represents a severe threat to the public interest, and whistleblowing remains the most effective fraud discovery mechanism. In this research, we integrate the theory of planned behavior with the fraud triangle to organize prior whistleblowing literature and model the intention of professional accountants to blow the whistle on a material accounting fraud. The results, based on responses from 284 professional organizational accountants, support our theory development and indicate that attitudes and perceptions of control over whistleblowing are positively related to whistleblowing intention. In supplemental analyses, we also find that gender and management level are significantly associated with whistleblowing intent. Our results provide evidence for using our integrated theoretical model to explain and predict the reporting intention of corporate accountants. Findings should aid organizations and regulators seeking to improve corporate ethical culture and aid governance researchers in their understanding of the complex environmental and individual factors impacting whistleblowing intent.

SUMMARY Both U.S. and international standard setters have sponsored initiatives to develop a reliable portfolio of audit quality indicators (AQIs). We conduct two experiments to examine how investors respond to receiving auditor-disclosed AQIs. We find that investors experience a stronger negative affective reaction toward the auditors when receiving a negative-trending AQI portfolio compared to receiving a positive trend of AQIs or when no AQIs are disclosed. In turn, investors receiving a negative-trending AQI portfolio are less likely to support auditor ratification and choose to voluntarily decrease their investment in the company. Results also indicate that including additional qualitative context within the disclosure increases investor support for auditor ratification when accompanying a positive-trending AQI portfolio but has no additional effect on investor decision-making for a negative-trending AQI portfolio. Our findings help to advance the dialogue on AQIs and suggest a possible path forward for disseminating AQIs to interested stakeholders. JEL Classifications: M40; M41; M42.

This study investigates the interplay of management and the audit committee on auditor judgments and evidence documentation. In a 2 × 2 between-subjects experiment, 58 experienced auditors were tasked with evaluating an inventory obsolescence issue when management's incentives to influence the auditor were either higher or lower. The auditors were also either provided or not provided with additional communicated expectations from the audit committee that opposed management's aggressive reporting preference. Drawing on research on competing preferences and source credibility theory, we predict and find that when management's incentives are higher, additional audit committee communication has a significant and positive impact on auditors' evidence evaluation and related judgments. However, we find no effect of added audit committee influence when management incentives are lower. These findings highlight the importance of examining the interrelationships among the various actors contributing to corporate governance and also inform standard setters about the benefits of increased communication between audit committees and auditors.

Concerns over “revolving door” practices of companies hiring directly from their external auditor led to a Sarbanes-Oxley Act provision mandating a one-year cooling-off period before such hires can occur. Yet little is known as to whether these alumni affiliations, still prevalent today, actually impair audit quality. Drawing on Social Identity Theory, we conduct an experiment to examine whether auditors experience heightened identification with an alumni-affiliated client manager and, if so, how this perceived relationship affects their professional skepticism in response to a management persuasion attempt. As predicted, absent the use of a management persuasion tactic, auditors identify more with an alumni-affiliated manager than a non-alumnus with equal professional experience, and this perceived social bond enhances the manager's influence. However, the use of a common persuasion tactic, while effective at influencing auditor judgment when used by an unaffiliated manager, “backfires” when used by an alumni-affiliated manager, leading to diminished persuasion and increased professional skepticism. Evidence suggests that auditors are better able to identify the inappropriateness of the persuasion attempt when the tactic is used by an alumni-affiliated manager.

SUMMARY We examine the effects of two critical factors auditors consider when auditing complex estimates, the decision to use a specialist and the relative aggressiveness of management's estimate, on jurors' auditor negligence assessments. Experiment 1 finds jurors view auditors' acceptance of a more aggressive estimate as more justifiable, and are thus less likely to find them negligent, when auditors consult with either internal or external specialists. However, these litigation benefits do not extend to audits of less aggressive estimates. Experiment 2 finds jurors are less likely to find auditors negligent when auditors use an external versus an internal specialist, due to greater perceptions of external specialist independence. We also find auditors accrue similar litigation benefits when an external specialist reviews the internal specialists' work. We conclude that utilizing external specialists, either to directly test complex estimates or to review internal specialists' work, limits auditors' litigation exposure when auditing relatively aggressive estimates. JEL Classifications: M40; M41; M42. Data Availability: Available upon request from the authors.